Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/19469
Authors: 
Wezel, Torsten
Year of Publication: 
2004
Series/Report no.: 
Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2004,02
Abstract: 
The paper discusses the question of whether financial participation of multilateral development banks does prompt private investors to inject more risky equity capital in emerging market banks. Using a theoretical model, it is stipulated that the presence of an official lender in a project gives the recipient country a stronger economic incentive to honor its contractual obligations instead of possibly restricting access to the investment position. An innovative endogenous variable measuring the amount of invested equity capital which, given a country's historical risk profile, can be considered "at risk" is tested in the empirical investigation. The observed outcome for the group of investors receiving co-financing by the International Finance Corporation (IFC) and/or the European Bank for Reconstruction and Development (EBRD) is related – applying a propensity score matching approach using information on the characteristics of non-participants – to the amount these firms would have invested had they not been selected for official support. The econometric results show that the "treatment effect" is significantly positive as stipulated. That is, in the German case financial participation of multilateral agencies in investment projects did have a positive impact on the risk exposure that investors were willing to bear.
Subjects: 
foreign direct investment
banks
emerging markets
multilateral development banks
program evaluation
propensity score matching
JEL: 
C14
G21
F21
Document Type: 
Working Paper

Files in This Item:
File
Size
481.51 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.