Talented overseas returnees and outward foreign direct investment

Abstract

This paper studies the effects of talented overseas returnees on firms’ outward foreign direct investment (OFDI). Using hand-collected data on the overseas experience of senior managers at Chinese-listed companies, we find that talented returnees significantly increase the probability of firms engaging in OFDI, especially in countries where the returnees worked or studied. Financial constraints and information asymmetry are two underlying mechanisms. Constrained firms are less likely to invest in areas in which they have less experience. And country-specific experience is particularly important in countries with poor information transparency.