Time: 13:00-15:00 (UK Time), Wednesday, 8 March 2023
Presenters: Prof. Hong Bo and Lawal Rodiat Yetunde, SOAS University of London
Co-author: Prof. Victor Murinde, SOAS University of London
Chair: Prof. Victor Murinde, SOAS University of London

Abstract
We investigate how the interaction between local and Chinese firms, which are involved in China’s infrastructure projects in Africa, affect the participating local firms. We argue that in addition to productivity spillovers, which constitute the conventional channel through which local firms are affected by FDI, local firms involved in China’s infrastructure projects can also benefit from interactions with Chinese investors through the signaling channel, i.e., the interaction may boost the stock market valuation of the involved local firms. We invoke the average treatment effect (ATE) model and the instrumental variable (IV) approach in our empirical analysis. We find that indigenous African listed firms benefit from interacting with Chinese investors mainly through the signalling channel, whereas foreign firms operating in Africa benefit from such interactions through both the productivity spillover channel and the signaling channel. The evidence suggests that the Chinese government’s direct support of these infrastructure projects is seen as an endorsement for the selected local African firms, thereby reducing asymmetric information between these firms and the stock market. Moreover, foreign firms operating in Africa have stronger absorptive capability than indigenous African listed firms, which explains the productivity spillovers associated exclusively with foreign firms.   

Keywords: Firm interactions; China’s infrastructure projects in Africa; FDI productivity spillovers; Signaling 

Presenters

Hong Bo is Professor in Financial Economics at the School of Finance & Management, SOAS University of London. Professor Bo received her degrees in Economics from Lanzhou University of China (BA), Renmin University of China (MSc), London School of Economics and Political Science, UK (MSc.), and University of Groningen, the Netherlands (PhD). Her research interests cover topics in financial economics, including firm investment decisions under uncertainty, capital market imperfections, comparative financial systems, corporate finance, corporate governance, and the Chinese economy. She has published in internationally well-recognized academic journals, including Journal of Corporate Finance, Review of Finance, Regional Studies, Journal of Banking and Finance, Economica, European Journal of Finance, and International Review of Financial Analysis.  

Lawal Rodiat Yetunde is a final-year PhD candidate in School of Finance and Management at SOAS University of London, sponsored by the Commonwealth Scholarship Commission, UK. She is also a Chartered Accountant and a Chartered Banker. Lawal holds an MSc in Finance from University of Ilorin in Nigeria and worked as Lecturer in Finance at the same university. Her research focuses on thematic issues, such as government policies and infrastructure development, the developmental benefits of Africa's romance with the developed world, and the behaviour of financial markets in the face of global uncertainty.