OECD Working Papers on International Investment

Selected studies on international investment and investment policy prepared for use within the OECD. They address such issues as investment agreements, dispute settlement, fair and equitable treatment, most favored nation treatment, and corruption.


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

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.


Keywords: Multinational Firms, Preferential Trade Agreements, Divestment, Bilateral Investment Treaties, International Investment, Double Taxation Agreements
JEL: F23: International Economics / International Factor Movements and International Business / Multinational Firms; International Business; F14: International Economics / Trade / Empirical Studies of Trade; F53: International Economics / International Relations, National Security, and International Political Economy / International Agreements and Observance; International Organizations; F15: International Economics / Trade / Economic Integration; F13: International Economics / Trade / Trade Policy; International Trade Organizations
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