Title: An empirical analysis of the OFDI influence on financing constraints based on listed companies in China

Authors: Xiao-Dong Wang; Lei Tu; Jing-Lu Li; Yue-Gang Song

Addresses: Business School, Zhengzhou University of Aeronautics, Zhengzhou, China ' Graduate School, Chinese Academy of Fiscal Sciences, Beijing, China ' Business School, Zhengzhou University of Aeronautics, Zhengzhou, China ' Business School, Henan Normal University, Xinxiang, China

Abstract: In China, where financing constraints are commonly seen in many companies, but at the same time, OFDI companies are experiencing increasing cash flows, the question that whether OFDI will influence a company's financing constraints draws researchers' attention. This paper-based on empirical analysis finds that: 1) OFDI mediates Chinese companies' financing constraints by lowering their outside financing cost, optimising the channels and the quality of their external financing, and enhancing the supplementing ability of outside funding to companies' cash flows; 2) compared with state-owned companies, OFDI's financing constraint mediating effect is more substantial in private-owned companies; for targeted countries' income levels. OFDI in developed countries has a more significant mediating effect; compared with other motivations, OFDI, which is market-oriented, has the most substantial mediating effect. And this result is mainly achieved through OFDI's 'contact effect', which draws closer the topographical coldness between the host OFDI country and the OFDI investor, mediates information asymmetry, and lowers outside investors' risk premium. The analysis in this paper extends research on OFDI's economic consequences in emerging economies and offers instructions for the government to guide the investment behaviour of listed companies.

Keywords: financing; constraints; outward foreign direct investment; OFDI; contact effect; China.

DOI: 10.1504/IJTM.2021.118313

International Journal of Technology Management, 2021 Vol.86 No.2/3/4, pp.125 - 147

Received: 11 May 2020
Accepted: 23 Nov 2020

Published online: 14 Oct 2021 *

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