Q2. What are the main factors that affect the sales growth?
Supply-side factors such as productivity and/or product quality may also contaminate the sales growth as a measure of demand-side shock.
Q3. How much of the growth in China was attributed to SOEs?
According to Hsieh and Song (2015), the corporatization of surviving SOEs and the entry of new SOEs collectively account for 21% of growth during this period.
Q4. What could be done to improve the flow of formal finance to the private sector?
further financial sector reforms could aim at improving the flow of formal finance to the private sector and reducing the availability of low-cost capital to SOEs.
Q5. What are the main factors that affect the performance of exporters?
Dai et al. (2016) show that processing exporters are less productive than non-processing exporters and nonexporters in China, and have inferior performance in many other aspects such as profitability, wages, R&D and skill intensity.
Q6. What is the effect of qD on investment?
In column [2], when interacting qD with ownership dummies, the authors find that the investment of private and foreign firms responds more sensitively to qD than other ownership types, and the effect is significant for all measures of qD, that is, one standard deviation increase of qD is associated with a rise of investment rate by 0.04 (net demand shock) to 0.33 (sales growth) but a decline by 0.16 (inventory growth).
Q7. What was the effect of a value-added tax reform on the North-East area?
For instance, a value-added tax reform was implemented for this region in July 2004 which generated considerable tax drawback for manufacturing firms and increased their profits.
Q8. What is the main reason why Chinese firms have become the main driving force of economic growth?
focusing on financial constraints alone cannot explain why private firms, which are generally believed to be more financially constrained, invest more and grow faster than unconstrained state-owned enterprises (SOEs), and have become the main driving force of China’s remarkable economic growth in the past few decades.
Q9. Why is the coefficient of foreign firms in regions with low financial development insignificant?
The coefficient of foreign firms in regions with low financial development is insignificant, which might be due to the fact that most foreign firms are located in provinces which are more highly developed financially.
Q10. What is the effect of the fundamental q on the investment of foreign firms?
The results are not entirely surprising, as the fundamental q is highly correlated with cash flow, i.e. firms’ investment can be very sensitive to their cash flow when their access to external finance is limited in regions with low financial development.
Q11. How is the correlation between qF and cash flow?
Since future profits are predicted based on current values, qF is highly correlated with cash flow and the correlation between these two variables is 0.61.
Q12. How does the system GMM estimator help to mitigate the effects of exogenous shocks?
Despite the advantages of the system GMM estimator in alleviating potential endogeneity bias and mismeasurement problem in the panel data context, the authors explore the impact of certain exogenous shocks on a firm’s investment, using the Difference-in-Difference approach (hereafter DID) in order to further shed light on the robustness of their findings under these exogenous shocks.
Q13. What is the standard deviation of investment opportunities across ownership groups?
The standard deviation of investment opportunities across the ownership groups can be found in Table 1.that is, one standard deviation increase of qS leads to a rise of investment rate by 0.06 (GMM) to 0.08 (WLP).
Q14. What is the p-value associated with the t test?
The authors also report the p-value associated with the t test for the equality of means for corresponding variables between SOEs and private firms.