How " the Belt and Road” Initiative, as a high-level, comprehensive and important initiative, affects the behaviors of micro-economic entities, and whether it can promote economic growth still lack in-depth research and comprehensive understanding. This paper exploits the Belt and Road Initiative as an exogenous quasi-experimental variation, and uses the listed companies of Chinese capital market between 2013 and 2016 as the research sample to examine how corporate investment responds to the Belt and Road Initiative. In order to further alleviate the endogenous problem, this paper uses the provinces on ancient " Silk Road” as an instrument variable. Then, from the perspective of firm heterogeneity, this paper examines the cross-sectional differences of different companies in the response to the Belt and Road Initiative. Finally, this paper conducts a series of robustness tests to ensure the causal effect of the basic research questions. The results show that the Belt and Road Initiative improves corporate investment opportunities. The results of difference-in-difference estimation show that the investment level of listed companies in affected provinces has increased by 10.11% after the Belt and Road Initiative has been put forward. After using instrument variable approach, the basic result remains unchanged. Furthermore, we find that the impact of the Belt and Road Initiative on corporate investment level is mainly driven by the companies with lower total factor productivity and lower markup. This paper provides quantitative evidence for the economic impact of the Belt and Road Initiative from a micro-economic perspective and has implications for understanding the real effects of economic policies and follow-up reforms. Compared to current literature, the contributions of this paper are as follows: firstly, this paper provides a quantitative analysis of the economic impact of the Belt and Road Initiative, and contributes to the relevant research of microcosmic channel of the impact of economic policy on economic growth, which to some degree can open the black box of how the Belt and Road Initiative promotes macroeconomic growth. Current studies mainly examine the impact of the Belt and Road Initiative on " the Belt and Road” countries but do not examine how Chinese local enterprises respond to the implementation of this initiative and the cross-sectional differences of areas and companies. Secondly, this paper contributes to the literature on the influencing factors of corporate investment. Corporate investment decisions are influenced by a number of factors, including macroeconomic policy uncertainty, industry-level product market competition and corporate executive characteristics. This paper examines the extent of corporate investment response to the Belt and Road Initiative and provides additional empirical evidence for the research in this area. Thirdly, to a certain extent, the use of quasi-natural experiment in this paper can alleviate the interference of endogeneity. The Belt and Road Initiative does not depend on the company-specific strategy at micro level. Such relatively " exogenous” characteristics are conducive to the alleviation of the endogenous problem. Moreover, this paper uses instrumental variable approach as well. Using a combination of quasi-natural experiment and instrumental variables, this paper provides empirical evidence for the causal effect between the Belt and Road Initiative and corporate investment response and provides reference for the identification strategy of the economic effects of the Belt and Road Initiative.
How Does Corporate Investment Respond to the Belt and Road Initiative? Evidence from a Quasi-natural Experiment
Journal of Finance and Economics Vol. 44, Issue 04, pp. 20 - 33 (2018) DOI:10.16538/j.cnki.jfe.2018.04.002
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Cite this article
Chen Shenglan, Liu Xiaoling. How Does Corporate Investment Respond to the Belt and Road Initiative? Evidence from a Quasi-natural Experiment[J]. Journal of Finance and Economics, 2018, 44(4): 20-33.
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