THE EFFECT OF COVID-19 PANDEMIC ON FOREIGN DIRECT INVESTMENT

Abstract

The COVID pandemic is a game-changer that affected almost every aspect of our lives, both economically and socially. The emergence and spread of the COVID virus forced countries worldwide to impose various restriction policies at different times. Growing economic ties between countries are accelerating the transfer of goods and information and the effect triggering economic crises.Multinational corporations' foreign direct investments (FDI) have been greatly affected, as they represent a significant global aspect of economic development in the last decades. The Foreign Direct Investments (FDI) are sensitive to economic and other shocks. Nevertheless, only by a few because FDI is often considered long-term and less sensitive to global shocks, as they involve large amounts of capital investment that are costly to reverse. This paper examines whether the COVID-19 pandemic impact FDI flows. If they do, we analyze the possible channels through which the COVID-19 pandemic influences FDI flows. Our findings show that during the COVID-19 pandemic, investment flows had different impacts on various sectors and were also influenced by the modes of entry. In the manufacturing sector, pandemic damage in host countries has a significant negative impact on both Greenfield FDI and cross-border mergers and acquisitions. In-home countries, it does not significantly impact both types of FDI.