Firm-level Foreign Direct Investment and International Return Differentials?



Using a rich firm-level dataset of listed and private firms in Europe we present new stylized facts on international return differentials. French and U.S. foreign investors earn higher returns than, in particular, Italian, Spanish, and Japanese investors. Returns of Japanese investors are less volatile suggesting a mean-variance trade-off but other return differentials are harder to rationalize. We explore whether informational barriers across legal groups, common language groups, neighboring-countries, or colonial-ties groups explain the return differentials finding little evidence of informational barriers as proxied with these groupings.
Contact information:
Sebastian Gryglewicz
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