 Inward FDI and Financial Constraints in Central and East European CountriesEmerging Markets Finance and Trade, 2006, vol. 42, issue 5, 28-60 Abstract: This study examines whether domestically owned firms in Central and Eastern European countries (CEECs) confronted higher financial constraints in their investments than did foreign-owned enterprises, and whether the domestic enterprises' financial constraints were caused by incoming foreign direct investment (FDI). In theory, foreign investment may be needed to bring in capital only initially; the subsequent investment can be financed locally. On the other hand, foreign-owned companies may be more attractive borrowers, crowding out domestic firms from imperfect host-country capital markets. Both hypotheses, however, are rejected, as the results are not consistent across different dependent variables and verification methods. There is some evidence that FDI reduced foreign subsidiaries' constraints without increasing the constraints suffered by the domestic enterprises. Tests are performed with regressions based on two alternative firm-level models, a direct one using perception-based assessment of the constraints, and an indirect one with financial indicators. Keywords: Business Environment and Enterprise Performance Survey; financial constraints; foreign direct investment; transition economies (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:42:y:2006:i:5:p:28-60 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals |
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