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Does bilateral investment treaty arbitration have any value for multinational corporations?

Author

Listed:
  • Brada, Josef C.
  • Chen, Chun-Da
  • Jia, Jingyi
  • Kutan, Ali Mustafa

Abstract

Using event study methodology, we investigate whether bilateral investment protection treaties afford protection to foreign investors. Examining arbitral decisions for firms from six countries shows that firms that received awards from arbitrators gained in market value by as much as 3%. Per dollar awarded, firms gained over $20 in market value. Thus, we conclude that the system of arbitration does afford significant benefits to firms that can demonstrate that they have been injured by host governments who violated the terms of the relevant investor protection treaty. We also find some evidence that arbitral decisions are anticipated by stock markets.

Suggested Citation

  • Brada, Josef C. & Chen, Chun-Da & Jia, Jingyi & Kutan, Ali Mustafa, 2020. "Does bilateral investment treaty arbitration have any value for multinational corporations?," BOFIT Discussion Papers 10/2020, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2020_010
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    References listed on IDEAS

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    More about this item

    Keywords

    bilateral investment treaties; international investment arbitration; foreign directinvestment; event studies; host country - investor disputes;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K33 - Law and Economics - - Other Substantive Areas of Law - - - International Law

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