Job Market Paper

  • Optimal Ownership and Firm Performance: Theory and Evidence from China's FDI Liberalization
    (with Hong Ma), January 2018.
    Abstract. Multinational firms organize the global production of highly specialized inputs in the face of inefficiencies arising from contractual frictions. An open question is by how much optimal firm organization can reduce these inefficiencies. This paper provides a first quantification of the performance gains from optimal ownership within multinationals. We exploit a unique policy change in China, which liberalized its severe restrictions on foreign ownership after its WTO accession. To guide our empirical analysis, we incorporate ownership restrictions into the property-rights theory of the multinational firm. Using a large panel of Chinese manufacturing firms, we show that increased foreign ownership after the liberalization induced changes in firms' input ratios and output in line with the theory. To quantify the gains from optimal ownership restructuring, we analyze the performance of foreign-acquired firms in liberalized industries in a difference-in-differences model. By choosing suitable control groups and applying propensity score reweighting, we carefully exclude other possible explanations. We find that optimal ownership restructuring led to firm-level output gains of up to 34% after two years, which increased further over the medium term.

Working Papers


Research in Progress

  • Firm Exports, Foreign Ownership, and the Global Financial Crisis (with Marcel Smolka).

  • Globalization and Inequality (with Tom Zylkin).