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Presented by: DEFRI SULISTIYANTO 10204611

outline
Abstract 1. Introduction 2. Government ownership and the investment-cash flow relation 3. Data and Descriptive Statistics 4. Regressions of investment and cash flows 5. Government control and investment efficiency 6. Endogeneity problem and robustness checks 7. Government control and financing channels 8. Conclusion

abstract

1. Introduction

This study examine the fixed asset investment by listed firms in China. The results->

Shed light on the financing of fixed asset investment, and Contribute to the debate on the relation between a firms internal resource and its capital expenditures, and The debate on the economic efficiency of state versus private ownership of business.

2. Government ownership and the investment-cash flow relation

Govt control influences the investment- cash flow relation. A majority of listed firms are spin-offs from wholly state owned enterprise, the state often retains a substantial investment stake in the listed spin-offs and can influence management decisions since the managers are drawn from the old SOEDs or are former govt bureaucrats.

3. Data and Descriptive Statistics

Sample : manufacturing firms listed on the main boards of Shenzhen and Shanghai stock exchange (1999- 2008) Financial and stock price data are from the China Securities Markets and Accounting Research Database.

4. Regressions of investment and cash flows

The result indicate that the I-CF curve is U-shaped for Chinas listed firms

4.1 The impact of govt control

The evidence shows that in Chinas listed companies, capital investment by govt controlled firms is more sensitive to CF than is investment by privately controlled firms.

5. Govt control and investment efficiency

The empirical result reported that ownership type influences corporate investment decisions. It found that govt controlled firms invest more than privately firms do, for a given level of internal funds.

6. Endogeneity problem and robustness checks

Govt ownership in Chinas listed companies is endogenously determined.

7. Govt control and Financing Channels

The results show that govt controlled listed firms do not enjoy preferential access to external financing channels when cash flows are low. Therefore, differences in the accessibility of these sources of financing do not explain the differences between the sensitivities of the investment- CF curves for govt controlled and privately controlled firms.

conclusion
The investment- CF relation in China is U-shaped curve Investment increases as internal funds increase when internal funds are high (positive), but decrease as internal funds increase when internal funds are succinctly low (negative) Government controlled firms the U-shaped investment CF curve steeper than it is for privately controlled firms, especially on the left hand side of the curve.