Property Rights Protection and Investment: A Natural Experiment from China

Miao, Meng (2014) Property Rights Protection and Investment: A Natural Experiment from China. Said Business School Working Paper 2014-14.

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This paper utilizes a natural experiment to examine the role of the protection of property rights in promoting investment. In order to explore a title-granting scheme in Shenzhen, China, I collect a sample of 83 listed SOE firms, with 32 of them holding about-to-be-entitled lands. Those landholders exhibit both a sharp short-term 7.8% additional increase in stock market price and a long-term 63% extra increase in investment, when compared with non-landholders, despite that there is no pre-event structural difference between the two. These increases in value are a result of having solved hold-up problems rather than a result of increased collateral values because those politically connected SOEs under analysis are financially unconstrained. Cross-sectionally, those firms with weaker pre-event protection against “hold-up” are associated with greater increases in share price and investment. Potentially, solving the hold-up problem of all unentitled land would bring about value of 2.2 Trillion RMB, almost triples Shenzhen's GDP in 2009.

Item Type: Oxford Saïd Research Paper
Keywords: property right, land title, natural experiment, investment
Date Deposited: 11 May 2015 11:51
Last Modified: 13 Oct 2015 14:08

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