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Home bias in divestment decisions of multinational corporations in the EU
Author(s) -
Resmini Laura,
Vittucci Marzetti Giuseppe
Publication year - 2020
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12471
Subject(s) - divestment , multinational corporation , subsidiary , prima facie , foreign direct investment , politics , debiasing , empirical evidence , economics , business , international economics , international trade , political science , macroeconomics , finance , law , psychology , philosophy , epistemology , cognitive science
We empirically investigate the claim that multinational corporations (MNCs) suffer from a “home bias” in divestment decisions: MNCs prefer to divest from foreign subsidiaries because the “emotional involvement” and the commitment in divesting from domestic subsidiaries is larger. This issue has not been yet empirically explored in the economic literature, although it is quite recurrent in the political debate on MNCs and FDI. Using detailed company‐level data on the EU corporate groups during the economic crisis (2008–2014), we show that, in spite of prima facie empirical evidence of a home bias, the bias disappears when firm‐, country‐, and sector‐specific factors are accounted for.