Does Banking FDI Promote Firm FDI?

2021 Fiscal Year Research-status Report

• Project/Area Number: 21K20161
• Research Institution: Waseda University
• Principal Investigator: 菊地 朋生 早稲田大学, 国際学術院(アジア太平洋研究科), 准教授 (60906527)
• Project Period (FY): 2021-08-30 – 2023-03-31
• Keywords: Multinationals / Chinese banking FDI / Manufacturing FDI / Credit constraints

Outline of Annual Research Achievements

We investigate the relationship between bank FDI and manufacturing firm FDI
using a detailed firm-level dataset on outbound multinational activity from China that was contemporaneous with the global expansion of China's Big-5 banks. Adopting an event study approach that exploits information on years of entry across potential host countries, we find that the establishment of a Big-5 bank subsidiary or branch is associated with a significant increase in subsequent years in Chinese firms'likelihood to establish an overseas subsidiary in that host country. We present tests - including an instrumental variables strategy - that build a case that the relationship from China's bank FDI to firm FDI is causal in nature.

Current Status of Research Progress

2: Research has progressed on the whole more than it was originally planned.

Reason

Covid19 prevented us to meet face-to-face but we have held our research meetings online.

Strategy for Future Research Activity

We will update the tables and figures and complete drafting the manuscript for submission to a top field journal.

Causes of Carryover

Covid-19 prevented me to invite my co-authors to Waseda to work on the project. We will hold our meetings online and seek opportunities to present our work online in the coming year.