Expropriation Risk and Investment: What Policy Makers can Learn from a Natural Experiment in China

HKUST IEMS Thought Leadership Brief No. 70


Allen Huang

Property rights institutions govern the ownership and usage of economic resources.

Strong property rights institutions help enforce contracts between the government and private entities and constrain a government’s arbitrary behavior and expropriation activities, the threat of which lowers firms’ expected returns from investments.

Our research shows that firms increase investments, especially those that result in tangible assets. when they perceive lower risk of expropriation activities.

Local governments should consider implementing rules and regulations that lower private companies’ explicit and implicit expropriation risks to stimulate investments.

About the Author 

Allen Huang is an Associate Professor in the Department of Accounting, the Associate Dean of the School of Business, and Faculty Associate of the IEMS at HKUST. His research has been featured in CFA Digest, CFO, Harvard Business Review, Harvard Law School Forum, Vox and Financial Times, and has won First Paper in MIT Asia Conference in Accounting (twice), IRRC Institute Research Award, and International Centre for Pension Management Research Award. His publications have appeared in top-tier finance, accounting and management journals such as the Journal of Finance, Management Science, The Accounting Review, Journal of Accounting Research, Journal of Accounting and Economics, Review of Accounting Studies, and Contemporary Accounting Research. He is an editor at the Journal of Business, Finance and Accounting. More >>


Bhambhwani, Siddharth M. and Dong, Hui and Huang, Allen, Expropriation Risk and Investment: A Natural Experiment (March 10, 2023). Journal of Financial and Quantitative Analysis, Forthcoming, HKUST Business School Research Paper No. 2023-108, Available at SSRN: https://ssrn.com/abstract=4419751 or http://dx.doi.org/10.2139/ssrn.4419751

Get updates from HKUST IEMS