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Corruption level and uncertainty, FDI and domestic investment

Hanousek, Jan, Shamshur, Anastasiya, Svejnar, Jan, Tresl, Jiri (2021) Corruption level and uncertainty, FDI and domestic investment. Journal of International Business Studies, . ISSN 0047-2506. E-ISSN 1478-6990. (doi:10.1057/s41267-021-00447-w) (Access to this publication is currently restricted. You may be able to access a copy if URLs are provided) (KAR id:88585)

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Abstract

Based on real options theory and institutional factors, we develop a theoretical framework for investment in the presence of corruption and use a sample of private firms in 13 European countries over 2001–2013 to carry out the first large-scale analysis of the impact of the level of corruption and uncertainty about corruption on post-entry investment of MNE subsidiaries. We employ several waves of managerial surveys (the Business Environment and Enterprise Performance Survey; BEEPS) to construct local- rather than merely country-level measures of corruption level and uncertainty. In combination with a large European firm-level database (Amadeus), we show that corruption uncertainty and corruption level do not have an effect on the investment of MNE subsidiaries. We next carry out the analysis on the sample of domestic firms and find a negative investment effect that is driven primarily by corruption uncertainty rather than corruption level. We also show that investment of domestic firms that are similar (matched) to MNE subsidiaries is unaffected directly by corruption, but is affected by uncertainties related to finances and judiciary. Our results are robust to controlling for various types of uncertainty, and they provide new insights into the effects of corruption on investment.

Item Type: Article
DOI/Identification number: 10.1057/s41267-021-00447-w
Uncontrolled keywords: Corruption; uncertainty; foreign direct investment (FDI); central and eastern Europe; multinational enterprises (MNEs); real option theory
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Depositing User: Anastasiya Shamshur
Date Deposited: 07 Jun 2021 14:09 UTC
Last Modified: 08 Jun 2021 08:29 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/88585 (The current URI for this page, for reference purposes)
Shamshur, Anastasiya: https://orcid.org/0000-0002-5091-5837
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