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| Srl | Item |
| 1 |
ID:
146157
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| Summary/Abstract |
We often presume that international financial actors have the same preferences, but this paper asks whether the property rights of foreign direct investors matter to sovereign bondholders. When governments expropriate direct investors, different investors' preferences could align over property rights issues. However, bondholders likely take positive signals if expropriation generates revenue for the state. Using a novel data set (1995–2011), I find that governments that earn revenue from expropriation can enjoy lower long-term spreads on sovereign bonds. Although governments that expropriate lose out on FDI, they can benefit by generating revenue and enjoying rewards in sovereign debt markets. Unpacking investor preferences thus reveals gaps in market-based informal property rights enforcement. When bondholders' and direct investors' preferences conflict, governments gain space to prioritize other goals over the protection of private property.
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| 2 |
ID:
169321
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| Summary/Abstract |
One goal of the law is to provide a means to return disputing parties to cooperation. The prevailing expectation is that international investment law largely does not do this; rather, an aggrieved foreign investor sues the host state as a last resort and divests. I use a new database of Investor-State Dispute Settlement (ISDS) arbitrations and firm-level bilateral investment to show that, in fact, claimant investors reinvest in the host state at least 31 percent of the time (between 1990 and 2015). Among investors who file for arbitration, and controlling for sector, important correlates of reinvestment include the claimant's legal strategy; the extent of the claimant's grievance and success; and the incidence of post-arbitration litigation. Despite unique aspects of its institutional design, the de facto international investment regime can help solve host state time-inconsistency problems consistent with standard expectations of law. Whether the probability of reinvestment is high enough to reinforce host state commitments to this controversial regime is an open question.
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| 3 |
ID:
165434
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| Summary/Abstract |
Although contentious interstate disputes are widely known to depress foreign direct investment (FDI), we identify and explain variation in investor responses even to territorial disputes, known to be slow to resolve and prone to militarization. Forward-looking and profit-seeking investors have incentives to increase FDI when the characteristics of a dispute point toward peace. These incentives drive them to increase investment even prior to an actual settlement. Given that legal focal points—when international law identifies one side in the dispute as having a clear legal advantage—promote peace, countries in disputes with legal focal points should receive more FDI. To support this argument, we use new data on international law and territorial disputes from 1980 to 2010 to explain variation in FDI across countries, as well as variation in the timing of within-country FDI accumulation. While a growing body of work demonstrates how international law influences state behavior, we show that it also profoundly influences the investment patterns of firms.
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| 4 |
ID:
137061
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| Summary/Abstract |
Since 1990, governments around the developing world have broken contracts made with multinational corporations (MNCs), but the incidence of breach varies across countries and over time. I argue that shared firm nationality is a key determinant of contract sanctity. MNCs are likely to divert investments or exit in response to breach with a firm of the same nationality but unlikely to react in ways costly to the host government otherwise. At the level of the economy as a whole, host governments gain permissive space to trade-off among national groups of investors when a greater diversity of foreign direct investment nationalities is present. I use national-, firm-, and dyadic-level data from 1990 to 2008 to demonstrate nationality-tied firm responses to breach. Counterintuitively, deeper integration with more nationally diverse MNCs enables more breach, as governments gain space to prioritize other goals over the property and preferences of foreign capital.
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| 5 |
ID:
137062
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| Summary/Abstract |
Since 1990, governments around the developing world have broken contracts made with multinational corporations (MNCs), but the incidence of breach varies across countries and over time. I argue that shared firm nationality is a key determinant of contract sanctity. MNCs are likely to divert investments or exit in response to breach with a firm of the same nationality but unlikely to react in ways costly to the host government otherwise. At the level of the economy as a whole, host governments gain permissive space to trade-off among national groups of investors when a greater diversity of foreign direct investment nationalities is present. I use national-, firm-, and dyadic-level data from 1990 to 2008 to demonstrate nationality-tied firm responses to breach. Counterintuitively, deeper integration with more nationally diverse MNCs enables more breach, as governments gain space to prioritize other goals over the property and preferences of foreign capital.
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| 6 |
ID:
145083
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| Summary/Abstract |
We argue that economic links, such as supply chains, can create a common roof that protects foreign investors in host countries that lack strong institutions to protect property rights. Supply chains link the activities of firms: when a host government breaks a contract with one firm, other firms in the supply chain are harmed. These partner firms therefore have incentive to protect one another’s property rights. This leads to the key implication of our argument: host governments are less likely to violate the property rights of firms that are more tightly linked with other firms in the host economy. We test our argument with cross-national data on investment arbitration, a survey of US multinational subsidiaries in Russia, and case studies from Azerbaijan. Our findings imply that one benefit of outsourcing in developing and transition economies is the creation of a network of partner firms that protect each other’s property rights.
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