What Makes Firms in Emerging Markets Attractive to Foreign Investors? Micro-Evidence from the Czech Republic
CERGE-EI Working Paper No. 294
48 Pages Posted: 18 Jun 2008
Date Written: March 1, 2006
We use a panel of Czech firms to enhance existing literature where the dependent variable is foreign ownership. In our estimation, we control for endogeneity and unobserved effects using standard methods complemented by tests for heterogenous Granger-causality. We also model foreign ownership as a response variable in a hazard model and consider sorting by foreign owners rather then by domestic firms. We find that foreigners target firms with a greater ownership concentration in industries's with higher level of risk, in countries with lower labor costs and corporate income taxes.
Keywords: foreign ownership, endogeneity, causality, fixed effects, hazard model, truncated sample
JEL Classification: G3, F21, C23, C24, C25
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