Trade-induced competition and ownership dynamics

Qing HU, Wenjing LI*, Chen LIN, Lai WEI

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)peer-review

Abstract

This paper documents a causal effect of trade-induced competition on firms’ ownership dynamics using the largest trade liberalization China has experienced, its accession to the World Trade Organization. By exploiting varying degrees of tariff reductions across industries, we find that firms that are more affected by competitive shocks experience a larger relative increase in their foreign ownership compared with those less affected. In addition, we find a stronger (weaker) effect for firms with a greater (lesser) demand for external financing and technology, which indicates the strategic role of foreign shareholders in empowering domestic firms to obtain financing and new technologies in a competitive market.
Original languageEnglish
Article number102979
JournalJournal of Development Economics
Volume160
Early online date27 Sep 2022
DOIs
Publication statusE-pub ahead of print - 27 Sep 2022

Bibliographical note

Funding Information:
We thank the editor, two anonymous referees, discussants and participants at the 15th Chinese Finance Annual Meeting and the 2018 Hong Kong–Shenzhen Greater Bay Area Finance Conference for their helpful comments and suggestions. Hu acknowledges the financial support from the Fundamental Research Funds for the Central Universities, and the Research Funds of Renmin University of China (No. 21XNF002 ). Li acknowledges the financial support from the National Natural Science Foundation of China (No. 71772078 ; 72132002 ). Lin acknowledges the financial support from the National Natural Science Foundation of China (No. 72192841 ). Wei acknowledges the financial support from the Early Career Scheme of the Hong Kong Research Grant Council (No. 23500417 ).

Publisher Copyright:
© 2022 Elsevier B.V.

Keywords

  • Trade liberalization
  • Competition
  • Ownership dynamics

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