Herd Behavior of Chinese Firm’s Outward FDI Along One Belt One Road- Analysis on Chinese Listed Manufacturing Sector

Abstract

This paper takes the listed firms of China’s manufacturing industry as the research object. FGLS model and Probit model are adopted to analyze 930 OFDI (Outward Foreign Direct Investment) events by listed manufacturing firms from 2004 to 2015. It is found that there exists obvious herd behavior in Chinese manufacturing firms’ OFDI, which is more significant in the investment to developed countries. The BRI (Belt and Road Initiative) launched in 2013 significantly enhanced the herding effect, enabling firms to allocate large amounts of money to countries along OBOR (One Belt and One Road). Firms’ OFDI herding behavior is more obvious in countries with lower GDP growth rate and infrastructure level. This study supports the location selection theory regarding Chinese firms’ OFDI, and provides a reference for optimizing OFDI location selection of Chinese manufacturing firms and improving the investment efficiency.