Work

Overseas operations and corporate financial asset allocation

Year: 2024

Type: article

Abstract: Using data on Chinese listed companies for 2008–2018, we find that firms participating in overseas operations, proxied by overseas subsidiaries, generally have higher financial asset allocations than other firms. At the micro level, the effects are more pronounced when the parent company faces serious financing constraints, has no overseas returned executives, has a business that is inconsistent with that of its overseas subsidiaries and has overseas subsidiaries that experience losses. At the macro level, the effects are more pronounced when overseas operations are in OECD and Belt and Road countries, or in areas with higher economic or political risks and greater investment opportunities. Financial asset allocation helps mitigate cash flow fluctuations and operational risks for multinational firms. This study advances research on the determinants of financial asset allocation and has implications relevant to the Chinese government’s “Go Global” and Belt and Road strategies and its efforts to realize a developed financial sector to service the Chinese economy.

Source: China Journal of Accounting Research

DOI: 10.1016/j.cjar.2024.100388

Authors: Shangkun Liang, Yuhao Niu, Sichao Wang, Chun Yuan

Institutions: Central University of Finance and Economics, Beijing Foreign Studies University

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

Open Access status: gold

Estimated APC paid: $1,800

Funders: National Natural Science Foundation of China, National Office for Philosophy and Social Sciences, National Social Science Fund of China