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Legal Traditions and Foreign Ownership Modes: Evidence from C hina
Author(s) -
Gu Quanlin,
Huang Shaoan,
Shi Yupeng
Publication year - 2015
Publication title -
asian economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.345
H-Index - 28
eISSN - 1467-8381
pISSN - 1351-3958
DOI - 10.1111/asej.12079
Subject(s) - foreign direct investment , enforcement , china , foreign ownership , control (management) , market economy , economics , business , monetary economics , international economics , law , political science , macroeconomics , management
Using census data gathered in 2001, the present paper examines how legal traditions influence foreign investors’ choice of ownership modes in C hina. The study finds that, first, investors from economies sharing the same legal origin with C hina tend to select ownership modes with a relatively high level of foreign control. That is, such foreign direct investment ( FDI ) firms are more likely to be wholly owned enterprises or joint ventures with relatively large foreign shares. Second, similarities in legal enforcement between C hina and the home economies correlate positively with high foreign control. Third, the effects of legal traditions on ownership modes are relatively weak for new entrants compared to their forerunners, probably owing to the continuous improvement in C hina's business and law institutions.