Financial frictions and foreign direct investment: Evidence from Japanese microdata

Horst Raff, Michael Ryan and Frank Stähler

Journal of International Economics, 2018, vol. 112, issue C, 109-122

Abstract: Using Japanese microdata for the period 1980 to 2000 we find evidence for two transmission channels from financial shocks to foreign direct investment: a collateral channel, whereby changes in the value of investors' landholdings affect their borrowing ability; and a lending channel, whereby changes in bank health affect banks' lending ability. Decreasing land values by 55% on average from their peak in 1990 to the sample mean reduces the predicted number of investments by 17%. Reducing banks' market-to-book ratios by an average 61% from their high in 1986 to the sample mean lowers predicted investment counts by 21%.

Keywords: Foreign direct investment; Multinational enterprise; Credit rationing; Collateral; Bank health; Japan (search for similar items in EconPapers)
JEL-codes: F23 L20 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022199618300242
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Financial Frictions and Foreign Direct Investment: Evidence from Japanese Microdata (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:112:y:2018:i:c:p:109-122

DOI: 10.1016/j.jinteco.2018.02.006

Access Statistics for this article

Journal of International Economics is currently edited by Martin Uribe and Costas Arkolakis

More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().