Fire-Sale FDI? The impact of financial crises on foreign direct investment

Olga Bogach and Ilan Noy
Authors registered in the RePEc Author Service: Olga Bogach Stoddard

No 18630, Working Paper Series from Victoria University of Wellington, School of Economics and Finance

Abstract: In this paper, we analyze the evolution of foreign direct investment (FDI) inflows to developing and emerging countries around financial crises. We empirically and thoroughly examine the Fire‐Sale FDI hypothesis and describe the pattern of FDI inflows surrounding financial crises. We also add a more granular detail about the types of financial crises and their potentially differential effects on FDI. We distinguish between Mergers and Acquisitions (M&A) and Greenfield investment, as well as between different motivations for FDI—horizontal (tariff jumping) and vertical (integrating production stages). We find that financial crises have a strong negative effect on inward FDI in our sample. Crises are also shown to reduce the value of horizontal and vertical FDI. We do not find empirical evidence of Fire‐Sale FDI. On the contrary, financial crises are shown to affect FDI flows and M&A activity adversely.

Keywords: International investment; Foreign direct investment (FDI); Financial crises; Mergers and Acquisitions; Multinational firms (search for similar items in EconPapers)
Date: 2012
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https://ir.wgtn.ac.nz/handle/123456789/18630

Related works:
Journal Article: Fire-sale FDI? The Impact of Financial Crises on Foreign Direct Investment (2015)
Working Paper: Fire-Sale FDI? The Impact of Financial Crisis on Foreign Direct Investment (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:vuw:vuwecf:18630

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