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Foreign investors, firm level productivity, and European economic integration

Author

Listed:
  • Bailey, Warren
  • Muradoglu, Gulnur
  • Onay, Ceylan
  • Phylaktis, Kate

Abstract

Using a comprehensive sample of listed and unlisted firms from 34 European countries, we study firm-level manufacturing outcomes conditioned on foreign investment, country characteristics, and EU membership. Higher foreign ownership is associated with higher productivity but lower employment, particularly when the host or source country is an EU member and scores high on disclosure and investor protection, and low on corruption. We confirm our interpretation using staggered EU accession dates and industry-level external financial dependence interacted with a financial crisis. The subset of Eastern European countries appears to benefit from foreign investment and EU accession without losing jobs. Nevertheless, manufacturing outcomes associated with survey findings on public sentiment towards globalization and migration confirm the social and political costs of globalization.

Suggested Citation

  • Bailey, Warren & Muradoglu, Gulnur & Onay, Ceylan & Phylaktis, Kate, 2024. "Foreign investors, firm level productivity, and European economic integration," Journal of Corporate Finance, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:corfin:v:85:y:2024:i:c:s0929119924000269
    DOI: 10.1016/j.jcorpfin.2024.102564
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    More about this item

    Keywords

    Foreign direct investment; FDI; European Union; Productivity; Employment;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance

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