| Summary: | 碩士 === 東吳大學 === 會計學系 === 95 === China has become one of the world top ten trade countries officially since the implementation of its economic reform open policy in 1979. The lower labor cost, extensive internal market, expected industry prospect, tax benefits, etc. are the major reasons that attract Taiwanese firms of gradually saturated internal market to invest in China. In addition to above investment incentive provided by China, Taiwanese firms with good technology and managerial competency further enhance their competition in investment in China. Based on the statistics from Apple Daily Newspaper, the percentage of foreign investors’ stockholdings had risen to 34% in October of 2006. Due to the leading role of foreign investors with more accurate decision making and adequate information searching in capital market, the investment behavior of domestic institutional investors and individual investors appear to follow foreign investors. As a result, it is conductive for domestic investors to understand the investment behavior of the foreign investors. The purpose of this research is to investigate whether the reinvestment of Taiwanese firms in China market which is measured by the number of reinvestment, reinvestment ratio, and reinvestment income is the major factor affecting foreign investors on their investment decision. In addition, if such decision is affected by industry effect.
The sample of this research includes listed Taiwanese firms with reinvestment in listed Chinese companies from 1999 to 2005. The empirical results show that the number of reinvest in Chinese companies is positively associated with percentage of foreign investors’ stockholdings. This study shows that foreign investors choose investment targets based on the number of reinvestment of Taiwanese firms in Chinese companies. The ratio of reinvestment of Taiwanese firms in Chinese companies to stockholders’ equity is negatively associated with percentage of foreign investors’ stockholdings. The negative relation between the reinvestment ratio and percentage of foreign investors’ stockholdings may result from the concern of foreign investors on the upper limit of reinvestment prescribed by the Taiwan government. The reinvestment income of Taiwanese firms from China market is positively associated with percentage of foreign investors’ stockholdings. Foreign investors choose their investment targets based on the reinvestment income of Taiwanese firms from China market. Thus, foreign investors would increase their stockholdings in Taiwanese firms of more reinvestment income from Chinese companies. Furthermore, foreign investors change their investment behavior by industry.
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