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Drivers of divestment decisions of multinational enterprises - A cross-country firm-level perspective

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Listed:
  • Maria Borga

    (OECD)

  • Perla Ibarlucea Flores

    (OECD)

  • Monika Sztajerowska

    (OECD)

Abstract

Divestment by multinational enterprises is an important yet understudied phenomenon. The few available estimates indicate that about a fifth of all foreign affiliates are divested every five years. This paper presents the findings from a novel cross-country firm-level dataset with financial and ownership information for over 62 000 foreign-owned affiliates from a selection of 41 OECD and G20 countries and their economic groups from 164 home countries for the period 2007-2014. The data allow an assessment of the relative importance of different determinants of divestment in a cross-country setting, including host country policies and bilateral factors, including trade, investment and tax agreements. The findings confirm that parents divested about one of every five foreign-owned affiliates between 2007-2014 and show that a number of host country policy and economic factors, including labour costs and international trade agreements, influence the divestment decision, on top of the firm considerations considered in previous studies.

Suggested Citation

  • Maria Borga & Perla Ibarlucea Flores & Monika Sztajerowska, 2020. "Drivers of divestment decisions of multinational enterprises - A cross-country firm-level perspective," OECD Working Papers on International Investment 2019/03, OECD Publishing.
  • Handle: RePEc:oec:dafaaa:2019/03-en
    DOI: 10.1787/5a376df4-en
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    1. Castellões, Bernardo & Silva-Rêgo, Bernardo & Dib, Luís Antônio, 2023. "Understanding divestment from an Uppsala school perspective," Journal of International Management, Elsevier, vol. 29(5).
    2. Erl, Ludwig & Kiesel, Florian & Koenigsmarck, Markus & Schiereck, Dirk, 2023. "Performance effects of sell-offs and the role of sell-off experience," The Quarterly Review of Economics and Finance, Elsevier, vol. 88(C), pages 244-257.

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    More about this item

    Keywords

    Bilateral Investment Treaties; Divestment; Double Taxation Agreements; International Investment; Multinational Firms; Preferential Trade Agreements;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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