Abstract
Outward Foreign Direct Investment (OFDI) is influenced by many factors. In these factors, the impact of the financial development of the investing country is very important and obvious. An important support for an enterprise to make OFDI is to get a sufficient source of funding, and the source of funding depends on the degree of development of domestic financial market. From the early research, we can find that OFDI in developing countries, at least to some extent, is the result of economic structural improvements and financial innovations. Taking China as an example, this paper studies the role of developing countries in the level of financial development in OFDI. By using the panel data of 30 provinces and autonomous regions in China during the five-year period from 2010 to 2014, we want to examine the development of financial markets in various regions impact on China’s outward foreign direct investment.
Highlights
Nowadays, developing countries are increasingly becoming an important force in the world’s outward foreign direct investment
Ratio, which represents the depth of financial development in each province, accounts for about 0.0089, and it is significant at 5% level
It shows that the level of financial development in a region has a significant positive impact on its outward foreign direct investment
Summary
Nowadays, developing countries are increasingly becoming an important force in the world’s outward foreign direct investment. The World Investment Report released by UNCTAD shows that, by the end of 2012, the flows of OFDI by Chinese enterprises, which accounted for 6.3% of the world’s flows, had jumped to the third place in the world and its stocks (about 2.3%) had ranked seventh in the world, just as it had become an important pillar of global outward foreign direct investment. Under this circumstance, one striking issue is why the outward foreign direct investment of Chinese enterprises has increased so rapidly? This paper from another perspective, that is, the development of local financial markets, to study its impact on China’s outward foreign direct investment
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More From: American Journal of Industrial and Business Management
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