Topic: Benefits of Foreign Ownership: Evidence from Foreign Direct Investment in China

Speaker:Jian Wang, Senior Research Economist and Advisor, Federal Reserve Bank of Dallas

Date: June 24th (Wed.)

Time: 2:00-3:30pm

Location: Building 4, Room 101

Language: English

Abstract:

To examine the effect of foreign direct investment, this paper compares the post-acquisition performance changes of foreign-and domestic-acquired firms in China. Unlike previous studies, we investigate the purified effect of foreign ownership by using domestic- acquired firms as the control group. After controlling for the acquisition effect that exists in domestic acquisitions, we find no evidence that foreign ownership can bring productivity gains to target firms. In contrast, a strong and robust finding is that foreign ownership significantly improves target firms’ financial conditions and exports relative to domestic-acquired firms. Foreign acquisition is also found to improve output, employment and wages for target firms. These findings conflict with the conventional view of productivity-driven FDI and highlight the financial channel through which FDI benefits the host countries.

About the speaker:

Jian Wang is senior research economist and advisor of Federal Reserve Bank of Dallas since 2013. Wang received a M.A. and a Ph.D. in Economics from University of Wisconsin-Madison. Prior to joining the Federal Reserve Bank of Dallas, he was a visiting fellow of Hong Kong Institute of Monetary Research and adjunct professor in Southern Methodist University. He has been a regular contributor on editorial board of Pacific Economic Review since 2012, and has published many essays in Annual Report of Federal Reserve Bank of Dallas, and Economic Letter and other leading journals in the industry.