Drivers and probability of outward foreign divestment in Eastern European Countries
Keywords:
complementary log-log analysis; determinants of divestment; Eastern Europe; foreign divestment; marginal probabilityAbstract
The study investigated drivers of divestment and the probability of divestment of outward foreign direct investment (DOFDI) in Eastern European Countries (EEC) from 1991 to 2021. The average likelihood of DOFDI for the EEC is 12%, with notable drivers including low economic growth and minor differences in general price levels of countries when denominated in the market exchange rate. Developed EEC countries showed a propensity towards a higher likelihood of DOFDI. Interestingly, a decrease in trade seemed to encourage DOFDI. Increased political regime characteristics and transitions were found to escalate the probability of DOFDI potentially. The study paved the way for understanding DOFDI for the EEC. It also sheds light on this concept for the region. The innovative measure of DOFDI as a probability measure, coupled with using a probit model to identify the drivers, brought to the fore new contributions to the scholarly domain. The probability of DOFDI was calculated, and the factors influencing it within the EEC were uncovered. This provides a fresh perspective by comparing transition and developed countries within the same region.
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