Where a contract is signed determines its value: Chinese provincial variation in utilized vs. contracted FDI flows
► Ex ante corporate investment plans and ex post investments differ systematically. ► China has substantial variation in the ratio of utilized to contracted FDI. ► Provinces may increase utilized FDI by strengthening their legal systems. ► Provinces may also benefit from reducing government bureaucr...
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Veröffentlicht in: | Journal of Comparative Economics 2011-03, Vol.39 (1), p.92-107 |
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Format: | Artikel |
Sprache: | eng |
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Zusammenfassung: | ► Ex ante corporate investment plans and ex post investments differ systematically. ► China has substantial variation in the ratio of utilized to contracted FDI. ► Provinces may increase utilized FDI by strengthening their legal systems. ► Provinces may also benefit from reducing government bureaucracy.
There are major differences between ex ante corporate investment plans and ex post investments. The case of China is useful for understanding this problem because there is substantial time series and cross sectional variation in the ratio of utilized to contracted FDI (
UC ratio), which is less than one in most province-year observations. Provinces may believe that they are rewarded for reporting higher levels of contracted FDI, which would lead to lower
UC ratios and higher policy incentives in subsequent years. Alternatively, provinces may be rewarded for reporting data more accurately, which would lead to higher
UC ratios and policy incentives in subsequent years. Empirical analysis supports the second, institutional theory and suggests that provinces may increase their rate of utilizing pledged FDI by strengthening their legal systems and reducing government bureaucracy. |
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ISSN: | 0147-5967 1095-7227 |
DOI: | 10.1016/j.jce.2010.10.002 |