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Cross-border Investments and Uncertainty Firm-level Evidence

Rafael Cezar, Timothee Gigout and Fabien Tripier ()

Working Papers from CEPII research center

Abstract: This paper studies the impact of uncertainty on cross-border investments. We build a data-set of firm-level outward Foreign Direct Investments between 2000 and 2015. We create a time and country varying measure of uncertainty based on the dispersion of idiosyncratic investment returns. An increase in uncertainty delays cross-border flows to the affected country. Yet, this average effect hides strong heterogeneity. Firms with low ex-ante performance durably reduce their foreign investments. Meanwhile high-performing firms increase their investments after the initial shock. We interpret these results as the evidence of a cleansing effect of uncertainty shocks among multinational firms in the presence of financial frictions.

Keywords: Uncertainty; Asymmetric Uncertainty; FDI flows; FDI Returns; Volatility; Multinational Firms (search for similar items in EconPapers)
JEL-codes: D81 F23 G10 G15 (search for similar items in EconPapers)
Date: 2020-03
New Economics Papers: this item is included in nep-bec, nep-ifn and nep-int
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Related works:
Journal Article: Cross-border investments and uncertainty: Firm-level evidence (2020) Downloads
Working Paper: Cross-border Investments and Uncertainty: Firm-level Evidence (2020) Downloads
Working Paper: Cross-border investments and uncertainty: Firm-level evidence (2020)
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