New research on location decisions of non-bank financial foreign direct investment in Europe

The Central Bank of Ireland today publishes a new Research Technical Paper ‘Location Decisions of Non-Bank Financial Foreign Direct Investment:Firm-Level Evidence from Europe’ (Technical Paper No. 04/RT/15).

The research paper uses firm-level data to examine the location decisions of newly incorporated foreign affiliates in the non-bank financial sector across 27 European countries over the period 2004 to 2012.

The main findings of the research are:

• Traditional determinants of overall FDI, including market size, barriers between the home and host country and regulation have comparable effects in the non-bank financial sector.
• The probability of a country being chosen as the location for a new foreign affiliate is found to be negatively associated with higher corporate tax rates and geographic distance but increases with the size and financial development of the host country.
• Gravity related characteristics such as the home and host country sharing a common legal system, language and currency are also found to increase the likelihood of non-bank financial FDI.