Foreign Direct Divestments (FDD) in Africa and Colonial Ties

Abstract

This study investigates the influence of colonial legacies on foreign divestment decisions (FDD) in African countries. Drawing on data spanning from 2010 to 2019, the study explores the intricate relationships between historical colonial relationships, macroeconomic factors, and divestment behaviours. Contrary to initial expectations, the analysis reveals no significant differences in divestment probabilities between former British and French colonies. However, it identifies an increased likelihood of divestment when the host country has a colonial history with France, prompting further examination of pre-colonial conditions and non-random selection dynamics by colonial powers. The findings emphasize the importance of nuanced analyses considering macroeconomic mechanisms unique to African contexts and underscore the need for refined research methodologies, including instrumental variable approaches, to address endogeneity concerns.