Risks and Firms' Decision Making on Outward Foreign Direct Investment: An Empirical Analysis of China's State-owned Enterprises

Abstract

This study explored how the risks encountered by Chinese state-owned enterprises (SOEs) affected their decision-making on outward foreign direct investment (OFDI), using data regarding the relationship between the host countries and China. The following conclusions were drawn. Larger SOEs with fixed capital exhibited a higher probability of conducting OFDI and did so on a larger scale. Various risks in host countries significantly hindered the OFDI of Chinese SOEs. In pursuit of natural resources, Chinese SOEs chose to take risks. The amount of OFDI by SOEs was positively related to the political, economic, and geographical relations between China and the corresponding host country.