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

See all articles by Peter Toth

Peter Toth

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Petr Zemcik

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Date Written: March 1, 2006

Abstract

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

Suggested Citation

Toth, Peter and Zemcik, Petr, What Makes Firms in Emerging Markets Attractive to Foreign Investors? Micro-Evidence from the Czech Republic (March 1, 2006). CERGE-EI Working Paper No. 294, Available at SSRN: https://ssrn.com/abstract=1147657 or http://dx.doi.org/10.2139/ssrn.1147657

Peter Toth (Contact Author)

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

Politickych veznu 7
Prague 1, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

Petr Zemcik

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

Politickych veznu 7
Prague 1, 111 21
Czech Republic

HOME PAGE: http://www.cerge-ei.cz

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