Home bias persistence in foreign direct investments

The purpose of this paper is to analyse the issues related to home bias and foreign direct investments (FDIs). We study the role of physical, cultural, and institutional distances from home on FDI decisions taken by corporations to assess whether the globalization of the past two decades has reduced their influence. Using the ‘home bias’ framework from the finance literature and the gravity model from the economics literature, we utilize a large sample of both developed and emerging markets, using FDI flows of 6263 unique bilateral country pairs over a 30-year period. We find strong empirical evidence of persistent home bias in FDI outflows, and we show that not only physical distance but also cultural and institutional similarities between host and source countries remain a decisive factor in foreign corporate investment decisions. We also show that such home bias is persistent over time and is observed around the world.

Impact of the financial crisis on cross-border mergers and acquisitions and concentration in the global banking industry

The global banking industry has seen dramatic changes in the past 40 years. Most recently, the financial liberalization of emerging markets and the global financial crisis have significantly impacted the market share of banks worldwide. This article investigates the impact of the 2007–2008 financial crisis on cross-border mergers and acquisitions (M&As) in the banking sector and emphasizes the role of emerging-market banks in the postcrisis consolidation trend. Using M&A data and concentration data over the period 2000–2013, our analysis indicates that the financial crisis had a significant impact on worldwide M&As, especially on the direction of the transactions. Emerging-market banks appear to be major acquirers in the postcrisis period, targeting both neighboring countries and developed economies in Europe. We also observe an increase in bank concentration in developed markets most hit by the financial crisis, especially in the United States and the United Kingdom, whereas bank concentration decreased in emerging markets.