Financial Constraint and the Mode of Outward Foreign Direct Investment: Cross-border Merge or Green Field Investment
- JIANG Guanhong, ZENG Jing
- JIANG Guanhong (Xiamen University, 361005)ZENG Jing (Bank of Shanghai, 200120)
Basing on the theory of Manova (2008) this paper investigates how financial constraint affects the mode of outward foreign investment and finds that firms with less financial constraint will choose cross-border merge and acquisitions, while firms with greater financial constraint have to choose green field investment. Then the authors apply corporate data of 2003—2010 to test the above theory, and find that it is supported by empirical evidence. For example, by lowering the financial constraint by 1%, the probability of choosing cross-border M&A will increase by 2.51%. The above finding holds under different robust tests. When the income of host countries and motives of OFDI are considered, the results are still robust.
JEL：F21, F23, D23
- Financial Constraint, Outward Foreign Direct Investment, Cross-border M&A, Green Field Investment