Determinants of Spanish foreign direct investment(destination countries financial development and financial vulnerability of the investor)

Resumo

By using time-varying measures of domestic country financial development (DCFD) and financial vulnerability at the parent level (FV), we analyze their effects on Spanish outward foreign direct investment (OFDI) during different periods of financial stress in Spain. To this end, we considered the bilateral stock positions to 127 countries considering 75 different activities over the period 2008-2017. We show that Spanish foreign affiliates tend to be located in countries with higher financial development, especially after the period with higher FV and financial stress in Spain. We also show how the effects of DCFD on Spanish OFDI differed across groups of activities and when considering different levels of FV. Typically, the higher the parent company's indebtedness (higher vulnerability), the lower the effects of financing in the destination countries on accumulated foreign direct investment.