| In September and October 2013,President Xi Jinping put forward the idea of building the "New Silk Road Economic Belt" and the "21st Century Maritime Silk Road" Initiative(hereinafter referred to as the "Belt and Road Initiative",BRI for short).The BRI aims to promote the orderly and free flow of economic factors,efficient allocation of resources,and in-depth market integration,as well as promote greater,higher-level and deeper regional cooperation.By doing so,an open,inclusive,balanced,and mutual benefited regional economic cooperation framework could be jointly created.Currently,the world economic growth momentum is insufficient,the game between emerging markets and developed countries has intensified,and the global epidemic of COVID-19 has slowed the process of economic globalization.Under such background,the BRI,as a new engine for China to comprehensively promote opening up,is a powerful guarantee for China’s current domestic and international dual-cycle development pattern,The huge market potential of the countries along the route,the complementarity of the industrial chains between China and the countries along the route,and the good cooperation foundation between China and the countries along the route have promoted Chinese firms to accelerate the pace of "going out".Outward investment is both a key area of the BRI and one of the major ways for firms to participate in the BRI.Outward investment has become increasingly important in both China’s economy and to firms under the BRI development.Therefore,exploring the driving factors and economic effects of firms’ outward investment under the BRI is both theoretically and practically important.According to the eclectic theory of international production,both the location advantage and the ownership advantage are important advantages that influence firm’s outward investment decision.The location advantage refers to the environmental advantages of the host country as for investors.The ownership advantage refers to the endowment that a firm does not have or cannot fully utilize when supplying a specific market or group of markets.As for the location advantage,most of the existing literature conducts research from a single perspective of home country or host country,and seldom explores how the financial cooperation relationship or the financial ties between the two countries affect firms’ outward investment behaviors.Moreover,as for the ownership advantage,the traditional OLI paradigm and other traditional multinational corporation theories are mainly based on the resource-based view,identifying and discussing the firm’s ownership advantages from the aspects of brand,technology,intangible knowledge and organizational capabilities that constitute the core competitiveness of the company.These theories relatively neglect other factors that might constitute the ownership advantage.The essence of outward investment is the cross-border flow of funds,and finance is the carrier of capital transfer.Therefore,at the macro level,the financial cooperation relationship between the host and the home country could constitute the location advantage of the host country and exert an important influence on the firms’ foreign investment behavior..As an important part of firms’ investment behavior,firms’outward investment is also restricted by their financing capabilities.Especially under the BRI,most of the countries along the route,including China,have relatively underdeveloped capital markets,and the degree of capital market opening is relatively low.Chinese firms generally restricted by various degrees of external financing constraints in the context of outward investment under the BRI.Therefore,as one of the ownership advantages of Chinese firms in investing in countries along the route,the financing capacity could also exert a significant influence on enterprises’ foreign investment activities.In summary,financial integration under the BRI is closely related to both the location advantage of host countries and the ownership advantage of Chinese firms in outward investment.Therefore,how different levels of financing mechanisms affect Chinese firms’ outward investment behavior,and what economic effects Chinese firms’ outward investment under the BRI has produced are both worthy of in-depth exploration.Based on the above analysis,this thesis takes the outward investments of Chinese listed firms as the research object,and explores the determinants and economic outcome of China’s outward investment under the BRI from the perspective of financial integration.At the macro and meso level,financial integration is the guarantee for the stable and long-term development of the BRI.The financial integration between China and countries along the route includes promoting currency cooperation,promoting financial supervision cooperation,and encouraging more financial institutions to participate in the BRI.Therefore,this thesis first discusses how China’s signing of bilateral currency swap agreements with the host countries,signing of a memorandum of understanding on financial supervision cooperation,and the investment of Chinese financial institutions affect the location choice of firms’ outward investments.At the micro level,capital advantages under the BRI is one of the unique advantages of Chinese firms in outward investments.A complete capital allocation process includes the flow of capital from the external capital market to the firm,and the distribution of capital within the group.Therefore,this thesis discusses the determinants of Chinese firm’ outward investment under the BRI from both internal and external aspects.Specifically,under China’s special institutional background,credit financing is still the main source of external financing for firms.Firms can establish connections with external financial institutions through the implementation of industry-finance integration,or improve the efficiency of capital allocation through related transactions within the internal capital market.Both of the industry-finance integration and the capital allocation within internal capital market may be important ways for firms to build their capital advantage.Therefore,this thesis explores how holding financial institutions and receiving group-related guarantees affect the scale and scope of outward investment under the BRI.In addition,the stock market is also closely related to corporate financing and outward investment activities.Therefore,this thesis further studies the capital market response of firms’ outward investment under the BRI,enriching the research on the economic outcomes of firms’ outward investment under the BRI from the perspective of the stock market.Specifically,this thesis mainly draws the following conclusions.First,this thesis takes non-financial A-share listed companies from 2005 to 2018 as sample,and manually collect from the annual reports to construct the location choice data of Chinese firms’ outward investment.On this basis,this thesis uses a conditional logistic regression model to test how macro and meso level financial integration mechanisms influence Chinese firms’ location choices in outward investments.Specifically,the macro and meso level financial integration mechanisms tested in the thesis refer to China’s signing of bilateral currency swap agreements with host countries,signing of financial regulatory cooperation agreements with host countries,and the outward investment of Chinese financial institutions.The results show that,China’s signing of bilateral currency swap agreements with host countries,signing of bilateral financial regulatory cooperation memorandums of understanding,and the investment by financial institutions can all attract Chinese non-financial firms to invest in host countries.In addition,the influence of these three financial integration mechanisms on firms’ location choice has been further strengthened after the BRI.The mechanism tests find that,the signing of bilateral currency swap agreements can promote firms to invest in the contracting countries or regions by reducing the risk of exchange rate fluctuations.Signing a memorandum of understanding on financial supervision cooperation with the host country can restrain the transmission of financial risks to a certain extent,and reduce the financial risks faced by firms in the process of investing in the host country.Chinese financial institutions’ investment in the host country is conducive to alleviating the financing constraints of non-financial Chinese companies investing in the host country.Furthermore,this thesis examines how the three financial integration mechanisms and the level of other interconnections between China and host countries under the BRI comprehensively affect the location choice of firms’ outward investment.The thesis divides the sample and regresses according to the level of policy communication between China and host countries,the level of infrastructure connectivity,and the level of unimpeded trade,respectively.The thesis finds that under the BRI,the macro-level financial integration mechanism and the level of policy communication between China and host countries have an substitutive relationship in affecting the location choice of Chinese firms’ outward investment.While the financial integration and infrastructure connectivity,as well as the financial integration and unimpeded trade,are mainly complementary in promoting the location choices of firms’ outward investment under the BRI.Secondly,this thesis matches the data of A-share listed firms holding financial institutions from 2005 to 2019,the data of A-share listed firms accepting group-related guarantees,and the large-scale outward investment data from the CGIT database to empirically test how micro-level financial integration mechanisms influences firms’outward investment under the BRI.Using the Difference-in-Difference(DID)method and conducting empirical tests at the "firm-host country-year" level,this thesis finds that under the BRI,both holding financial institutions and accepting group-related guarantees can significantly increase firms’ total investment,average investment(intensive margin)and investment scope(extensive margin)in countries along the route.In the meanwhile,due to the overlap between the holding financial institutions and accepting group-related guarantees in the mechanism that affects firms’ outward investment,the two have an substitutive relationship in promoting the scale and scope of firms’ outward investment under the BRI.The mechanism tests show that,under the BRI,holding financial institutions can expand the scale and scope of investment in countries along the route by both alleviating the financing constraints and enhancing the level of risk-taking of investment firms.Accepting group-related guarantees can promote the the scale and scope of outward investments by both alleviating the financing constraints and reducing the debt financing costs of investment firms.Furthermore,this thesis examines the comprehensive impact of the two micro level financial integration mechanisms and the level of macro-level interconnection between China and host countries on the outward investment of firms under the BRI.The subgroup tests find that,when the degree of interconnection is higher,the promoting effects of holding financial institutions and accepting group-related guarantees on Chinese firms’ outward investment under the BRI is more significant.The interconnection mechanisms at the macro level is more embodied in promoting the location choices of firms,while the financing mechanism at the micro level has further promoted the scale and scope of firms’ investment in host countries.Therefore,under the BRI,the interconnection between China and host countries and the micro-level financing mechanisms are mainly manifested as complementary effects in promoting firms’ outward investment.Finally,from the perspective of the stock market and stock investors,this thesis takes the large-scale outward investment events of Chinese listed firms as the research object,and analyzes the stock market response of the large-scale outward investment of Chinese listed firms under the BRI.Through the event study and the DID method,the thesis finds that the proposal of the BRI has significantly improved the stock market response of Chinese firms’ large-scale outward investment in countries along the route.Such impact is heterogeneous at the firm,industry,and country level.Specifically,compared with state-owned firms,the BRI has played a more prominent role in promoting the stock market response of outward investment conducted by non-state-owned firms.Compared with overseas listed Chinese firms,the BRI has played a more prominent role in promoting the stock market response of outward investment conducted by A-share listed firms.Compared with investment in other industries,the BRI has played a more prominent role in promoting the stock market response of outward investments in transportation infrastructure related industries.Compared with investments in host countries with relatively small institutional differences from China,the BRI’s role in promoting the stock market response is more prominently reflected in outward investments in host countries with greater institutional differences from China.In addition,with the implementation of the BRI,the interconnection construction between China and the countries along the route has been further promoted.This thesis further explores how the level of connectivity between China and the host country affects the stock market response of outward investment under the BRI.It is found that,under the BRI,frequent state visits with host countries,the signing of bilateral investment treaties,the signing of currency swap agreements,and the signing of bilateral financial regulatory cooperation memorandums can significantly improve stock market response of the large-scale outward investment.The above results show that stock investors have relatively positive expectations on the construction of interconnection under the BRI.In terms of theory,this thesis expands the research on causality identification of the policy effects of the BRI at the micro level.It enriches and perfects the theory of outward investment by developing countries from the perspective of financial integration.It also provides more empirical evidence for firms to make outward investment decisions.In terms of practice,this thesis is conducive to providing theoretical reference for better promoting outward investment under the BRI and promoting the high-quality development of the BRI. |
