Risk, Financial Stability and FDI

Research output: Working paperWorking papers


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.
Original languageEnglish
Place of PublicationEssex
PublisherEssex Business School, University of Essex
Number of pages61
Publication statusPublished - 01.11.2018
Externally publishedYes

Bibliographical note

PPN 334911060 (Monografische Reihe)

    Research areas

  • Economics - FDI, Multinational enterprises, Financial Stability, Institutional risk Aversion, Euro area, International Regulation