Abstract:
On the perspective of demand shocks and financial constraints, this study investigates the capital investment fluctuation of China’s Listed Companies during the Financial Crisis. Based on the quarterly data, the results show there is a decline of 19.4% on capital expenditure in post-crisis period compared with those in the pre-crisis period. In addition, the companies with more overseas market businesses reduced more capital investments than the others. At the meantime, the cash holding of these companies is rising and the debt financing is declining. Additionally, there is little evidence indicating a relationship between financial constrain of pre-crisis and the capital investment of current crisis. This study argues that comparing to the financing constraints hypothesis which stems from credit supply shock, demand shocks hypothesis stems from the decline and uncertainty of international market demand is a more appropriate explanation to the listed companies’ investment and financing behavior during the financial crisis.
Allen, F., Qian, J. Q., Shan S. C., and Zhao M. 2014. “The IPO of Industrial and Commercial Bank of China and the ‘Chinese model’ of Privatizing Large Financial Institutions”, The European Journal of Finance, 20(7~9): 599~624.
[12]
Almeida, H., Campello, M., Laranjeira, B., Weisbenner, S. 2012. “Corporate Debt Maturity and the Real Effects of the 2007 Financial Crisis”, Critical Finance Review, 1(1): 3~58.
[13]
Bloom, N. 2009. “The Impact of Uncertainty Shocks”, Econometrica, 77(3): 623~685.
[14]
Brunnermeier, M. K. 2009. “Deciphering the Liquidity and Credit Crunch 2007-2008”, The Journal of Economic Perspectives, 23(1):77~100.
[15]
Brunnermeier, M., Oehmke, M. 2012. “Bubbles, Financial Crises, and Systemic Risk”, NBER Working Paper.
[16]
Cheng, M., Dhaliwal. D., and Zhang. Y. 2013. “Does Investment Efficiency Improve after the Disclosure of Material Weaknesses in Internal Control over Financial Reporting?”, Journal of Accounting and Economics, 56(1):1~18.
[17]
Duchin, R., Ozbas, O., and Sensoy, B. A. 2010. “Costly External Finance, Corporate Investment, and the Subprime Mortgage Credit Crisis”, Journal of Financial Economics, 97(3):418~435.
[18]
Easley, D., and O' Hara, M. 2010. “Liquidity and Valuation in an Uncertain World”, Journal of Financial Economics, 97(1): 1~11.
[19]
Kahle, K.M., and Stulz, R. M. 2013. “Access to Capital, Investment, and the Financial Crisis”, Journal of Financial Economics, 110(2): 280~299.
[20]
Shleifer, A., and Vishny, R. W. 2010. “Unstable Banking”, Journal of Financial Economics, 97(3): 306~318.
