Research On The Influence Of Foreign Entry On Corporate Inventory Adjustment Behavior

Since the reform and opening up in 1979,China has continuously expanded its openness to the domestic market.It has adopted various policies and measures and improved the business environment to attract foreign investment and gather advanced production factors,and gradually formed comprehensive investment advantages including high-end factors focused on talent,technology and capital,complete industrial structure,sound infrastructure,optimized spatial layout,and superior ecological environment.All of them provide a source of power for China to continue to attract foreign investment.The entry of foreign capital has not only injected a large amount of capital elements into China's economic development,but also has a profound impact on the domestic market and domestic enterprises due to its spillover effects and competition effects.Against the background of the current Sino-US trade frictions,China adopted the further deepening reforms and opening up policy as well as increasing the attractiveness of foreign investment,it would not only help to alleviate the short-term economic growth decline,but also benefit China's industrial structure adjustment and domestic value chain construction.With the adjustment of foreign investment admission policies and the gradual improvement of the domestic business environment,the pace of multinational enterprises entering China's domestic market has gradually accelerated.The entry of foreign capital has an impact on the behavior of domestic enterprises and the domestic market.A large number of scholars have studied the impact of foreign investment on the micro-behavior of enterprises,such as increasing the productivity of domestic companies,the unit labor cost of manufacturing companies,the added value of local companies' exports,the technical content of exports,and the innovation level and innovation duration of the company,as well as increasing the degree of capital mismatch,promoting the upgrading of the industrial structure,and increasing the gender wage gap.However,insufficient attention has been paid to the issue of corporate inventory adjustments.On enterprises' micro-behavior choices,inventory is a very important issue that enterprises face in the operation process.Companies will adjust their inventories out of comprehensive consideration of out-of-stock costs and order costs.At the same time,the company's inventory level is also affected by factors such as unit order costs,lead time,and lead time uncertainty.Therefore,the company's inventory selection is closely related to the market environment.In the view of this,this article would analyzes the impact of foreign entry on corporate inventory adjustment behavior from three aspects: foreign capital deregulation,foreign mergers and acquisitions,and foreign entry under industrial linkagesThis article theoretically analyzes the influence of foreign entry on corporate inventory adjustment behavior.This paper firstly constructs the logical relationship between the deregulation of foreign investment and the impact of corporate inventory adjustment,and combines the existing literature to deduce the logical thinking that deregulation of foreign capital affects the adjustment of corporate inventory by affecting supply and demand uncertainty and expected competitive effects,and then analyzes the theoretical mechanism for the impact of foreign capital deregulation on inventory adjustment.Then we got conclusion 1: The deregulation of foreign investment would increase the uncertainty faced by enterprises.For risk prevention and control,companies would increase the inventory of non-finished products;at the same time,the competitive effect brought by deregulation of foreign investment will affect enterprises by increasing the input of intermediate products to increase non-finished products inventory.Then,starting from the theory of industrial organization,this article attempts to build a theoretical framework for the impact of foreign mergers and acquisitions on corporate inventory adjustments,and finds that foreign mergers and acquisitions would affect the company's inventory behavior through structural barriers,strategic barriers,and corporate performance.Foreign mergers and acquisitions would brought economies of scale,the realization of product diversification,market expansion,reduction of enterprise costs,and improvement of enterprise performance.These will affect the inventory of non-finished products of enterprises.Then we got conclusion 2: Foreign mergers and acquisitions may increase corporate productivity and improve corporate performance,while reducing corporate inventory of finished products.At the same time,foreign mergers and acquisitions would expand the scale of the product market and affect the company's inventory of non-finished products.Finally,from the perspective of industrial linkage,this article analyzes the logic of foreign investment in the upstream and downstream industries that affect the inventory of enterprises.It points out that upstream foreign investment affects the inventory of downstream enterprises through spillover effects and competitive effects,and the absorptive capacity of domestic-funded enterprises is the adjustment variable of the relationship between the two.The entry of downstream foreign capital affects the upstream non-finished product inventory through competition effects,and effects the upstream finished product inventory or overall inventory through spillover effects.Then we got conclusion 3: the upstream foreign capital reduces the finished product or overall inventory by increasing enterprise productivity,and increases the inventory of non-finished products by increasing the varieties of intermediate input factors.Market competition or changes in the degree of agglomeration brought about by the entry of upstream foreign capital would affect the inventory of non-finished products.Moreover,the technological distance with foreign technology frontiers has a moderating effect on the upstream foreign capital influencing downstream enterprises' inventory.Downstream foreign investment affects upstream inventory adjustments through the increase of input demand and the increase of TFP caused by spillover effects.On the basis of theoretical research,this paper systematically sorts out the evolution of foreign investment policy and the process of attracting capital,and identifies and measures the two variables of concern,foreign capital entry and corporate inventory,to lay the foundation for the empirical test in Chapters five to seven.The fifth chapter analyzes the impact of deregulation of foreign capital on the inventory adjustment behavior of enterprises.In the view of before entering,this chapter analysis the policy shock on the inventory adjustment behavior.Using the adjustment of “Foreign Investment Industry Guidance Catalogue” in 2002 as the quasi-natural experiment,from the perspective of corporate inventory,the double difference method is used to empirically study the impact of deregulation of foreign capital on the adjustment of corporate non-finished products inventory.The sixth chapter studies the impact of foreign mergers and acquisitions on corporate inventory adjustment behavior,which is to analyze its impact on corporate inventory adjustment behavior from foreign capital entering domestic companies at the ongoing stage.The industrial enterprise database and the BVD database are used to comprehensively analyze the influence of the real entry of foreign capital on the inventory adjustment behavior of enterprises.The two databases complement each other and improve each other in order to comprehensively evaluate the inventory effect of foreign mergers and acquisitions.The seventh chapter studies the influence of upstream and downstream foreign investment on the inventory adjustment behavior of enterprises from the perspective of the industrial chain.It is to further identify and measure the vertical production-related foreign investment and enterprise inventory behavior after considering the upstream and downstream industry linkages.Using high-dimensional panel fixed effects model and intermediary moderating variable model to conduct empirical tests,this chapter explore the impact of upstream and downstream foreign investment on the adjustment of corporate inventory.Based on theoretical research and empirical research,this article has obtained the following main conclusions.First,the deregulation of foreign capital will affect the non-finished product inventory of enterprises through two channels of supply and demand uncertainty as well as competition effects.The competitive effect brought by deregulation is more prominent than the agglomeration effect.By affecting the demand for intermediate products,it would effect the inventory of enterprises,and the policy effect would be significantly increase the inventory of non-finished products of manufacturing enterprises and their fluctuations.And for those enterprises with high inventory levels,enterprises in inland areas,state-owned enterprises and light industrial enterprises,the effect of this policy is greater.Second,foreign mergers and acquisitions would affect corporate inventory through structural and strategic barriers.Among them,structural barriers reduce the company's finished product inventory and overall inventory by reducing corporate costs and increasing capital stock.Strategic barriers can increase the company's non-finished product inventory through economies of scale,expand the market share and diversified products.In addition,the integration into the global supply chain,increased resource allocation rate,cutting-edge management and flexible financing channels brought about by foreign mergers and acquisitions can all achieve the purpose of “destocking” by improving business performance,and the “destocking” effect has a certain degree of sustainability.The heterogeneity test found that the impact of foreign mergers and acquisitions on the inventory of non-finished products in coastal areas was significantly positive,and the effect on non-finished products inventories in high-tech industries was more prominent.The test results of different databases also showed that for listed companies,the effect of “destocking” caused by foreign mergers and acquisitions is more prominent.Third,the foreign capital entry of upstream would significantly increase the inventory of non-finished products of downstream enterprises.Intermediate product input and technological gaps act as intermediary variables and adjustment variables to affect the foreign capital entry of upstream on the non-finished products of the company.Moreover,the foreign capital entry of upstream would bring about changes in the degree of market competition and agglomeration,and affect corporate inventories through the market structure.However,theoretical analysis and empirical analysis have different conclusions on the influence of upstream foreign capital entry on downstream enterprises' finished product inventories and overall inventory.Theoretical analysis believes that upstream foreign capital reduces finished products or overall inventories by increasing enterprise productivity,while the empirical analysis only verifies the upstream foreign capital entry increase the company's productivity,but not reduce the company's finished product inventory or overall inventory.Therefore,this article predicts that there may be other influence channels for the impact of upstream foreign investment on the company's finished product inventory and overall inventory.In addition,the entry of downstream foreign capital has no significant effect on the “destocking” of domestic enterprises,that means,foreign companies may be more inclined to choose intermediate products provided by foreign companies in the upstream of the supply chain.This research makes contributions in the following three aspects.First,threoretically,this article proposes that deregulation of foreign investment would increase the risks faced by enterprises,and enterprises would increase the inventory of non-finished products due to the need for risk prevention and control.Foreign mergers and acquisitions will increase the demand for non-finished products inventory of enterprises,and reduce the finished products inventory and the overall inventory level.In the existing literature,there is not much literature that combines the foreign investment behavior(regarded as a macroeconomic policy)with the micro-behavior of enterprises to study(Lu et al.,2017;Jiang Lingduo et al.,2018;Mao Qilin and Xu Jiayun,2018;Han Chao and Zhu Pengzhou,2018),And no literature has been found to analyze the impact of foreign investment on corporate inventory behavior.The research in this article will definitely enrich the research on the impact of macroeconomic policies and foreign investment on the micro-behavior of enterprises.Second,in the identification method,the double difference method can effectively avoid the endogenous problem.The conventional methods to analysis the factors affecting inventory adjustment in the previous literature include qualitative analysis,literature review,and OLS regression.These research methods lack quantitative evaluation or have problems such as missing variables,while the DID method does not need to rely on a specific function form,and can directly estimate the inventory adjustment effect brought about by foreign investment,and the conclusion is more intuitive and credible.Third,when studying the impact of foreign investment on inventory adjustment under the linkage of the industrial chain,using the method of Sun Puyang(2015),this paper constructs upstream and downstream foreign investment inflow indicators,and adopts a high-dimensional panel fixed-effect model to carry out empirical test,and combine the moderated mediating effect model.With the combination of psychology research methods and economic research methods,the article would provide a reference for the formulation and adjustment of China's future investment policies.There are eight chapters in this doctoral dissertation.And the specific arrangements for each chapter are as follows: Chapter One,based on the realistic background and existing research,the research questions of this article are to be proposed while focusing on the research background,then introduces the research ideas and significance,and focuses on the main research innovations on three aspects including perspective innovation,theoretical mechanism innovation and research methods innovation.In chapter two,on the basis of collecting and analyzing domestic and international documents,the deficiencies of existing research would be summarized from three aspects: the economic effects of foreign direct investment,the theoretical research on corporate inventory management,and the impact of foreign capital entry on corporate micro-behavior choices.More importantly,the contribution of this research would be pointed out based on the insufficiency of existing literature.The third chapter is the theoretical analysis of the adjustment behavior of the company's inventory by the entry of foreign capital.The theoretical deduced from three aspects: before the entry of foreign capital(relaxation of foreign investment control policies),when the foreign capital enters(foreign mergers and acquisitions),and after the entry of foreign capital(foreign investment from the perspective of industrial chain linkage).the chapter analyzes the logic relationship of foreign capital's entry on the adjustment of corporate inventory,and expounds the specific impact mechanism.Chapter four provides an in-depth analysis of the evolution of foreign investment policy,foreign investment and corporate inventory behavior,laying a foundation for follow-up theoretical and empirical research.First,systematically sort out China's economic development stage since the reform and opening up and the corresponding changes in investment policies and changes in the amount and direction of FDI after the policy changes;secondly,differentiate the foreign entry,respectively explain the identification of foreign capital deregulation,the characteristic facts of foreign mergers and acquisitions,and the measurement of upstream and downstream foreign investment.Besides,we divides the company's inventory into finished product inventory,non-finished product inventory and overall inventory level,using industrial enterprise database to describe the characteristics of the industry's inventory level.Chapter five would use the adjustment of “Catalogue for the Guidance of Foreign Investment Industries” in 2002 as the quasi-natural experiment.From the perspective of enterprises inventory,we uses the double difference method to empirically study the impact of foreign entry liberalization on enterprise's non-product inventory adjustment.The study found that the foreign entry liberalization significantly increased the enterprise's non-product inventory.This conclusion is still valid after considering the identification assumptions and a series of other factors that may interfere with the estimation results.The increase in non-finished product inventory of enterprises caused by the deregulation of foreign capital is mainly realized through increased input of intermediate products due to intensified market competition.The paper further found that the enhancement of non-finished product inventory due to foreign entry liberalization is more prominent for inland enterprises,state-owned enterprises and light industrial enterprises.Chapter six would apply the industrial enterprise database and BVD database to comprehensively analyze the impact of foreign capital mergers and acquisitions on the company's inventory adjustment behavior.The empirical test is carried out using identification methods such as multi-period difference method and PSM+DID.The study found that foreign mergers and acquisitions will increase the target company's non-finished product inventory,and at the same time help manufacturing companies “de-stock”.Comparing the conclusions drawn from the two databases,it not only shows that there is a“pinching” effect in foreign mergers and acquisitions,but also verify that the“destocking” effect of foreign mergers and acquisitions is greater on listed companies.Chapter seven studies the impact of upstream and downstream foreign investment on corporate inventories from the perspective of industrial chain linkages.It shows that upstream foreign investment will significantly increase the inventory levels of downstream companies,especially the overall inventory and non-finished products inventory.Analyzing its specific transmission mechanism,it shows that upstream foreign investment mainly affects the inventory level of enterprises by affecting the input of intermediate products.Meanwhile,technological distance has a significant moderating effect on the increase in inventory caused by the influence of foreign investment through channel of the intermediate products input.The entry of downstream foreign capital is beneficial to upstream companies to reduce inventory levels,and the effect is not significant among domestic-funded companies.Chapter eight reviews and summarizes the main research conclusions of this article,and puts forward corresponding policy recommendations and directions for further research.