Property Rights, Finance, and Reinvestment: Evidence from China's Private Enterprises

20 Pages Posted: 30 Oct 2009

See all articles by Chong-En Bai

Chong-En Bai

The University of Hong Kong - School of Economics and Finance; University of Michigan - William Davidson Institute

Julan Du

The Chinese University of Hong Kong (CUHK) - Department of Economics

Yi Lu

School of Business, University of Hong Kong

Zhigang Tao

The University of Hong Kong - School of Business

Date Written: September 2009

Abstract

The case of China seems to present a counterexample to the literature on economic institutions as its private enterprises have achieved spectacular growth despite poor protection of private properties and difficulties in accessing external finance. In this study, we address this apparent puzzle by investigating the impacts of property rights protection and access to external finance on the reinvestment decision. Using the instrumental variable estimation to address the endogeneity issues, we find that property rights protection is more important for the reinvestment decision than the access to external finance.

Keywords: Property Rights Protection, Access to External Finance, Reinvestment Decision, China Economy

JEL Classification: P14, G34, L25, D23

Suggested Citation

Bai, Chong-En and Du, Julan and Lu, Yi and Tao, Zhigang, Property Rights, Finance, and Reinvestment: Evidence from China's Private Enterprises (September 2009). Available at SSRN: https://ssrn.com/abstract=1495682 or http://dx.doi.org/10.2139/ssrn.1495682

Chong-En Bai

The University of Hong Kong - School of Economics and Finance ( email )

8th Floor Kennedy Town Centre
23 Belcher's Street
Kennedy Town
Hong Kong
(852) 2859-1036 (Phone)
(852) 2548-1152 (Fax)

University of Michigan - William Davidson Institute ( email )

724 E. University Ave.
Wyly Hall
Ann Arbor, MI 48109-1234
United States

Julan Du

The Chinese University of Hong Kong (CUHK) - Department of Economics ( email )

Shatin, N.T.
Hong Kong

Yi Lu (Contact Author)

School of Business, University of Hong Kong ( email )

Rm 730, Meng Wah Complex
Pokfulam Road
Hong Kong
Hong Kong
(852) 2241-5245 (Phone)
(852) 2858-5614 (Fax)

HOME PAGE: http://www.fbe.hku.hk/~luyi

Zhigang Tao

The University of Hong Kong - School of Business ( email )

Meng Wah Complex
Pokfulam Road
Hong Kong
China
(852) 2857-8223 (Phone)
(852) 2858-5614 (Fax)

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