Fire-Sale FDI? The Impact of Financial Crisis on Foreign Direct Investment

Olga Bogach () and Ilan Noy
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Olga Bogach: Department of Economics, University of Hawaii at Manoa
Authors registered in the RePEc Author Service: Olga Bogach Stoddard

No 201205, Working Papers from University of Hawaii at Manoa, Department of Economics

Abstract: In this paper, we analyze the evolution of foreign direct investment (FDI) inflows to developing and emerging countries around financial crises. We empirically and thoroughly examine the Fire-Sale FDI hypothesis and describe the pattern of FDI inflows surrounding financial crises. We also add a more granular detail about the types of financial crises and their potentially differential effects on FDI. We distinguish between Mergers and Acquisitions (M&A) and Greenfield investment, as well as between different motivations for FDI—horizontal (tariff jumping) and vertical (integrating production stages). We find that financial crises have a strong negative effect on inward FDI in our sample. Crises are also shown to reduce the value of horizontal and vertical FDI. We do not find empirical evidence of Fire-Sale FDI. On the contrary, financial crises are shown to affect FDI flows and M&A activity adversely.

Keywords: International investment; Foreign direct investment (FDI); Financial crises; Mergers and Acquisitions; Multinational firms (search for similar items in EconPapers)
JEL-codes: F21 F23 F29 G01 G34 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2012-03-21
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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http://www.economics.hawaii.edu/research/workingpapers/WP_12-5.pdf First version, 2012 (application/pdf)

Related works:
Journal Article: Fire-sale FDI? The Impact of Financial Crises on Foreign Direct Investment (2015)
Working Paper: Fire-Sale FDI? The impact of financial crises on foreign direct investment (2012)
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