Fire-Sale FDI1 Viral Acharya2 London Business School and CEPR
نویسندگان
چکیده
Financial crises in countries are often accompanied by an outow of foreign portfolio investment and an inow of foreign direct investment (FDI). We provide an agency-theoretic framework that explains this phenomenon. During crises, agency problems a¤ecting domestic rms are exacerbated, and, in turn, external nancing constrained. Direct ownership can circumvent these problems, but during crises, e¢ cient owners (e.g. other domestic rms) face similar nancing constraints. The result is a transfer of ownership to foreign rms, including ine¢ cient ones, at re-sale prices. Such re-sale FDI is associated with a ipping of acquired rms back to domestic owners once the crisis abates. J.E.L. Classi cation: G21, G28, G32, E58, D61 Keywords: Capital ight, FDI ows, nancial crises, foreign takeovers, ipping.
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