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Law and Foreign Direct Investment. IES WORKING PAPER 4/2011

Guerin, Selen Sarisoy (2011) Law and Foreign Direct Investment. IES WORKING PAPER 4/2011. [Working Paper]

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    In this paper we examine the effect of law on foreign direct investment outflows with a specific interest in the relationship between international investment law and domestic private property laws. Our results indicate that FDI investor is indifferent to host country property rights, hence shareholder protection by law is not a significant determinant of FDI outflows. We argue that FDI, in contrast with other types of capital flows, can effectively mitigate the agency problem through majority ownership and control, hence reduce exposure to ex-post expropriation by the affiliate. On the other hand, FDI investor remains exposed to risk of expropriation by the host government and is strongly sensitive to the enforcement of law in the host country. In contrast with recent literature we conclude that there are no causal relationship between bilateral investment treaties and FDI.

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    Item Type: Working Paper
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > law & legal affairs-general (includes international law)
    EU policies and themes > External relations > international economy
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Institute for European Studies (Brussels) > Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 12 Feb 2015 16:20
    Number of Pages: 44
    Last Modified: 12 Feb 2015 16:20

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