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Drivers of divestment decisions of multinational enterprises - A cross-country firm-level perspective

Maria Borga, Perla Ibarlucea Flores and Monika Sztajerowska
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Maria Borga: OECD
Perla Ibarlucea Flores: OECD
Monika Sztajerowska: OECD

No 2019/03, OECD Working Papers on International Investment from OECD Publishing

Abstract: Divestment by multinational enterprises is an important yet understudied phenomenon. The few available estimates indicate that about a fifth of all foreign affiliates are divested every five years. This paper presents the findings from a novel cross-country firm-level dataset with financial and ownership information for over 62 000 foreign-owned affiliates from a selection of 41 OECD and G20 countries and their economic groups from 164 home countries for the period 2007-2014. The data allow an assessment of the relative importance of different determinants of divestment in a cross-country setting, including host country policies and bilateral factors, including trade, investment and tax agreements. The findings confirm that parents divested about one of every five foreign-owned affiliates between 2007-2014 and show that a number of host country policy and economic factors, including labour costs and international trade agreements, influence the divestment decision, on top of the firm considerations considered in previous studies.

Keywords: Bilateral Investment Treaties; Divestment; Double Taxation Agreements; International Investment; Multinational Firms; Preferential Trade Agreements (search for similar items in EconPapers)
JEL-codes: F13 F14 F15 F23 F53 (search for similar items in EconPapers)
Date: 2020-01-15
New Economics Papers: this item is included in nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:oec:dafaaa:2019/03-en

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