Presence of foreign firms and the firm capital structure: evidence from China's manufacturing sector

This paper argues that there is a link between foreign presence and the leverage of domestic firms. This link is empirically evaluated by using firm level panel data from China. The empirical estimation based on (i) the Tobit and (ii) the Instrumental Variable Tobit regression reveals that, in overall terms, the impact of foreign presence on the leverage of domestic firms in China's manufacturing sector is negative. We find that the negative impact on the leverage of privately owned firms is relatively large. We expect the impact of foreign presence on the leverage of domestic firms to vary from industry to industry.

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The 42nd Australian Conference of Economists: beyond the frontiers: new directions in economics

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978-1-921877-12-4

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