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Foreign Exchange Derivatives Regulation Policy and Overseas Firms‘ Investment Efficiency

【Authors】
ZHAO Feng, LV Yuan & CHENG Yue
【WorkUnit】
ZHAO Feng (Beijing Technology and Business University, 100048)LV Yuan (Peking University, 102600)CHENG Yue (Beijing Technology and Business University, 100048)
【Abstract】

Learning from LLSV's academic ideas of “Law and Finance”, this paper constructs the Foreign Exchange Derivatives Regulatory Index (FEDRI BTBU) by consulting 96 laws and regulations governing foreign exchange derivatives, and investigates the effects of financial derivatives regulation on overseas corporate investment efficiency with listed Chinese firms engaging in cross-border investment from 2007 to 2016 as samples. It finds that in the long run, the foreign exchange derivatives regulation policy will stimulate overseas firms' investment efficiency, known as the “stimulation effect”, but suppress it in the short term, known as the “suppression effect”. Given the impact of equity concentration, it finds that moderate equity concentration will have positive impact on the relationship between foreign exchange derivatives regulation and investment efficiency in the short term, but high equity concentration will exert negative impact in the long run; and that when the samples are divided by ownership, the impact on the relationship between foreign exchange derivatives regulation and investment efficiency is more significant in stateowned enterprises. Further research shows that compared with over-investing enterprises, derivatives regulation has more impact on the investment efficiency of underinvesting firms; the higher the degree of marketization, the larger the scale of cross-border investment and the higher the growth of firms, the greater the impact of derivatives regulation on investment efficiency. The conclusions of this paper have significant theoretical and practical value for the government to evaluate the effects of foreign exchange derivatives regulation policy and for Chinese overseas firms to improve their investment efficiency. 
 
JEL:F31, G38, K20

【KeyWords】
Foreign Exchange Derivatives Regulation, Investment Efficiency, Foreign Exchange Derivatives Regulatory Index, Cross-border Investment