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Risk, Financial Stability and FDI

Kellard, Neil M and Kontonikas, Alexandros and Lamla, Michael J and Maiani, Stefano and Wood, Geoffrey (2018) Risk, Financial Stability and FDI. Working Paper. Essex Finance Centre Working Papers, Colchester.


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All Foreign Direct Investment (FDI) involves risk. Supplementing the IB literature, we assess the effects of financial system risk on FDI trends. Specifically, we propose a new theoretical paradigm combining institutional risk aversion and institutional affinity, suggesting MNE-generated FDI will be sensitive to sovereign and bank-related risks. Employing a large panel of bilateral FDI holdings from 112 origin countries in the Eurozone, results show that financial stability in origin and host countries, matters for FDI. Policymakers in countries seeking to attract FDI should be attentive to both domestic conditions and the financing environment that MNEs encounter in their home countries.

Item Type: Monograph (Working Paper)
Uncontrolled Keywords: Foreign direct investment; Financial stability; Sovereign yields; Euro area; International regulation
Subjects: H Social Sciences > HG Finance
Divisions: Faculty of Social Sciences
Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
SWORD Depositor: Elements
Depositing User: Elements
Date Deposited: 05 Nov 2018 15:40
Last Modified: 23 Sep 2022 19:29

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