Why Do People Oppose Foreign Acquisitions? Evidence from Japanese Individual-Level Data

This study empirically examines the determinants of individuals' attitudes about inward foreign direct investment (FDI) using responses from questionnaire surveys that were originally designed. Individuals' preferences for inward FDI tend to differ between greenfield investments and mergers and acquisitions (M&A), and people are more likely to have a negative attitude toward M&A than greenfield investments. Our results show that people with a negative image of the so-called "vulture fund" for foreign capital tend to oppose inward FDI, and this is more pronounced for M&A than greenfield investments. Moreover, loss aversion and high time preference rates are strongly related to opposition to inward FDI, and people with such behavioral biases tend to refuse indigenous firms to be acquired by foreign capital, even if they agree to accept greenfield investment. These results indicate that people's preferences for inward FDI depend more on non-economic attributes than economic attributes, which is consistent with recent empirical studies on trade policy preferences.