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IFDI, OFDI, and divestment: a global level analysis

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  • Santosh Kumar Sahu

    (Indian Institute of Technology Madras)

  • Prantik Bagchi

    (Madras School of Economics)

Abstract

Using the World Bank’s data, we explain factors related to divestment using various limited dependent models. For the robustness of our estimated models, we also use sub-sample analysis. Reducing profit margin will likely increase divestment, supporting the reverse FDI theory. Trade, political instability, non-performing loans, and R&D significantly influence divestment. A paradoxical result is found for trade, posing a serious question of whether liberalization is better or worse for the economy. Higher investment in innovation increases the possibility of divestment, which may be a reason for shifting the R&D investment to product development. Energy intensity, corruption, population exposure to higher pollution, and higher income and energy-importing countries seem to have influenced specific measures' divestment.

Suggested Citation

  • Santosh Kumar Sahu & Prantik Bagchi, 2023. "IFDI, OFDI, and divestment: a global level analysis," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 25(1), pages 72-100, December.
    • Handle: RePEc:spr:jsecdv:v:25:y:2023:i:1:d:10.1007_s40847-023-00260-1
    DOI: 10.1007/s40847-023-00260-1
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    More about this item

    Keywords

    Divestment; Profitability; Reverse FDI theory; Corruption; Energy intensity;
    All these keywords.

    JEL classification:

    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • G01 - Financial Economics - - General - - - Financial Crises
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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