An Empirical Study on the Effect of Oversea Investment Insurance of Korea

Abstract

Purpose : The purpose of this study is to empirically examine the effect of Oversea Investment Insurance on Korean foreign direct investment in the 2000s. Research design, data, methodology : For this purpose, the study establishes an econometric model in the framework of theoretical equation for determinants of direct investment. Next, panel data estimations with pooled, fixed effects and random effects models have been conducted by using a panel data set for Korean Foreign Direct Investment to 17 partner countries from 1995 to 2018. Results : The estimation results demonstrate the evidence for the influence of GDP, per capita GDP, trade, and patent in its partner countries on flows of Korea’s foreign direct investment including green field and MA in particular for the green field investment of Korea. These results imply that the effect of the insurance is notable but it differs across the types of investment such as green filed and M&A. Conclusions : The results in the analysis suggest that the policy authority consider the possibility of the difference in the effect across the types of foreign direct investment, and implement more sophisticated management strategies according to the different types for oversea investment insurance in Korea.