Affiliate Ownership Structure Responses to FDI Liberalization Policies

Michael Ryan and Ayumu Tanaka

No cdajf, SocArXiv from Center for Open Science

Abstract: The 1990s saw many countries liberalize their inward foreign direct investment (FDI) policies. From a macro view, the speed of liberalization varied, with most countries gradually liberalizing. Korea, however, implemented rapid FDI liberalization after the 1997 Asian currency crisis and provides an ideal case for our analysis. Using matched parent-firm-foreign subsidiary data, this study analyzes how multinational enterprises (MNEs) changed their ownership ratios, FDI stock, and the number of subsidiaries in response to liberalization. Our difference-in-differences (DiD) analysis of the Korean liberalization case shows that MNEs did not increase their FDI stock but increased their ownership ratio and the number of subsidiaries in Korea. At the same time, we also find that the ownership ratio of Japanese firms in Korea is still lower than that in other developed countries, suggesting that there is a strong hysteresis effect at work in the subsidiary ownership ratio.

Date: 2023-11-20
New Economics Papers: this item is included in nep-int and nep-sea
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:cdajf

DOI: 10.31219/osf.io/cdajf

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