Wait-and-See or Follow Up? A Collective Strategy of Enterprises Coping with the Uncertainty of Investment Policy
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| Title | Wait-and-See or Follow Up? A Collective Strategy of Enterprises Coping with the Uncertainty of Investment Policy
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| Author | Luo Zhi and Xu Xianxiang |
| Organization | Economics and Management School, Wuhan University；Lingnan (University) College,Sun Yat-sen University |
| Email | luozhi1225@gmail.com；lnsxuxx@mail.edu.cn |
| Key Words | Uncertainty of Investment Policy; Short Term of Investment; Local Official |
| Abstract | In these years, how enterprises cope with the uncertainty of investment policy has become a very knotty problem. This paper tries to loosen an implied assumption of real-options effect and put forward a collective strategy of enterprises dealing with the uncertainty of investment policy. We point out that a collective strategy of enterprises facing the uncertainty of investment policy is wait-and-see and follow up which means some of the enterprises choose to wait-and-see while the others choose to follow up. We use the deviation of the real investment at the end of one year from the planned investment at the beginning of this year to measure the uncertainty of investment policy. Using the date and the Chinese industrial enterprises data, we test the collective strategy mentioned above. In order to avoid the endogenesis, we use the governor of provinces changes as the instrument. The results show that, facing the uncertainty of investment policy, the enterprises which have close relationship with the government will follow up, while the other enterprises will wait-and-see. Our findings are robust and provide a new thought for the enterprises coping with the uncertainty. |
| Serial Number | WP726 |
| Time | 2014-10-10 |
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