Research

This work investigates the effect of foreign direct investment on quality of political governance, corruption and investment profile in the host country. We modify existing theoretical model to allow for nonlinear relationship between FDI and political risk. Estimating structural model of the relationship between quality of governance, FDI and economic development via maximum likelihood, we find evidence of a U-shape effect of per capita inward FDI stock on quality of governance. This finding is robust to a change of estimation methods and model specifications. We also observe a U-shape effect of FDI on corruption and investment profile. A possible explanation to a nonlinear effect of FDI is that as the importance of foreign capital to local economy grows, foreign investors increase their political influence in the host country, which they then employ to further their interests - better protection of property rights and better control over corruption.

This work applies event study methodology to investigate the effect of firm-announcement earnings surprise on the stock price of announcing firm and how this effect spillovers to the returns of the related industry and stock market as a whole. In line with past research, at firm-level we find significant positive stock price response to the earnings surprise. At the industry level our results are inconclusive. Finally, we fail to find evidence that earnings surprises spillover to market portfolio after controlling for macroeconomic factors. We contribute to the earnings surprise literature by proposing a model capable of accounting for the asymmetry and non-linearity of the earnings surprise - abnormal returns relationship observed in the data. Applying our model to the analysis of relationship between earnings surprise and announcing firm's abnormal returns estimated over three event windows, we observe that the earnings surprise effect at, pre- and post-announcement is not uniform. Our findings suggest that earnings surprises of firms that consistently outperform forecasts have less new information on announcement.

In 2005 president of Russia V. Putin changed the existing gubernatorial election system with presidential appointment system. While incumbent governors remained in power, the reform significantly decreased their political independence and effectively changed the governors' principal from a combination of regional population and president, to president alone.  This work investigates how the behavior of governors changed following the introduction of appointment system.  Do governors' efforts align more with central government interests and less with those of regional population? To answer these questions, we analyse the largest dataset of Russian federal and regional news using a combination of natural language processing techniques, supervised machine learning and large language models.  The resulting dataset allows us to conduct difference-in-difference study using time until the end of elected term as intensity of reform exposure.

While there is much work on the effect of quality of governance (QoG) on foreign direct investment (FDI) allocation, the reverse relationship attracts much less attention. In this work we investigate the effect of FDI on quality of provincial governance in Vietnam post WTO accession. To address endogeneity between FDI and QoG we construct shift-share IV. Estimating 2SLS fixed-effects regression we find evidence that growth in FDI engagement in provincial economy decreases quality of provincial government.