Do sovereign credit ratings matter for foreign direct investments?

Peilin Cai, Quan Gan and Suk-Joong Kim ()

Journal of International Financial Markets, Institutions and Money, 2018, vol. 55, issue C, 50-64

Abstract: This paper examines the relationship between sovereign credit ratings and FDI flows from 31 OECD donor countries to 72 recipient (OECD and non-OECD) countries over the period of 1985–2012. There are three main findings in the paper. First, sovereign credit ratings of both donor and recipient countries are important drivers of bilateral FDI flows. FDIs in general flow from low-rated donor countries to high-rated recipient countries. Second, an OECD recipient receives more FDIs when its credit rating is high, whereas a non-OECD recipient receives more FDIs when its credit rating is low. Third, countries receive more FDIs when their geographic region has a higher average credit rating compared to other regions.

Keywords: FDI; Sovereign credit rating; Regional rating effect (search for similar items in EconPapers)
JEL-codes: F30 G15 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:55:y:2018:i:c:p:50-64

DOI: 10.1016/j.intfin.2018.01.003

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