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Article: Institutions and corporate investment: Evidence from investment-implied return on capital in China

TitleInstitutions and corporate investment: Evidence from investment-implied return on capital in China
Authors
Issue Date2011
PublisherCambridge University Press. The Journal's web site is located at http://journals.cambridge.org/action/displayJournal?jid=jfq
Citation
Journal Of Financial And Quantitative Analysis, 2011, v. 46 n. 6, p. 1831-1863 How to Cite?
AbstractWe assess the impact of institutions on Chinese firms' corporate investment in an investment Euler equation framework. We allow the variables measuring institutions to affect the rate at which firm managers discount future investment payoffs. Applying generalized method of moments estimators to large samples of Chinese firms, we estimate the stochastic discount rates derived from actual investment and examine how they vary across institutional variables. We document robust evidence that ownership is the primary institutional factor affecting corporate investment in China. The derived discount rate for a nonstate firm is approximately 10 percentage points higher than that of an otherwise equal state firm. State firms tend to use higher discount rates to invest after they are partially privatized. We also find that firms with higher levels of corporate governance use higher discount rates to make investment. © Copyright Michael G. Foster School of Business, University of Washington 2011.
Persistent Identifierhttp://hdl.handle.net/10722/152924
ISSN
2015 Impact Factor: 1.628
2015 SCImago Journal Rankings: 2.998
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorLiu, Qen_HK
dc.contributor.authorSiu, Aen_HK
dc.date.accessioned2012-07-16T09:51:52Z-
dc.date.available2012-07-16T09:51:52Z-
dc.date.issued2011en_HK
dc.identifier.citationJournal Of Financial And Quantitative Analysis, 2011, v. 46 n. 6, p. 1831-1863en_HK
dc.identifier.issn0022-1090en_HK
dc.identifier.urihttp://hdl.handle.net/10722/152924-
dc.description.abstractWe assess the impact of institutions on Chinese firms' corporate investment in an investment Euler equation framework. We allow the variables measuring institutions to affect the rate at which firm managers discount future investment payoffs. Applying generalized method of moments estimators to large samples of Chinese firms, we estimate the stochastic discount rates derived from actual investment and examine how they vary across institutional variables. We document robust evidence that ownership is the primary institutional factor affecting corporate investment in China. The derived discount rate for a nonstate firm is approximately 10 percentage points higher than that of an otherwise equal state firm. State firms tend to use higher discount rates to invest after they are partially privatized. We also find that firms with higher levels of corporate governance use higher discount rates to make investment. © Copyright Michael G. Foster School of Business, University of Washington 2011.en_HK
dc.languageengen_US
dc.publisherCambridge University Press. The Journal's web site is located at http://journals.cambridge.org/action/displayJournal?jid=jfqen_HK
dc.relation.ispartofJournal of Financial and Quantitative Analysisen_HK
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.titleInstitutions and corporate investment: Evidence from investment-implied return on capital in Chinaen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0022-1090&volume=46&issue=6&spage=1831&epage=1863&date=2011&atitle=Institutions+and+Corporate+Investment:+Evidence+from+Investment-Implied+Return+on+Capital+in+Chinaen_US
dc.identifier.emailLiu, Q: qliu@hku.hken_HK
dc.identifier.emailSiu, A: hrnekfs@hkucc.hku.hken_HK
dc.identifier.authorityLiu, Q=rp01078en_HK
dc.identifier.authoritySiu, A=rp01094en_HK
dc.description.naturepostprint-
dc.identifier.doi10.1017/S0022109011000494en_HK
dc.identifier.scopuseid_2-s2.0-84863137779en_HK
dc.identifier.hkuros200640en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-84863137779&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume46en_HK
dc.identifier.issue6en_HK
dc.identifier.spage1831en_HK
dc.identifier.epage1863en_HK
dc.identifier.isiWOS:000300961700009-
dc.publisher.placeUnited Kingdomen_HK
dc.identifier.scopusauthoridLiu, Q=55429572300en_HK
dc.identifier.scopusauthoridSiu, A=7006727827en_HK

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