This study identifies the impact of Bilateral Investment Treaties (BITs) on foreign direct investments (FDI) by taking advantage of the random timing of 44 unilateral BIT terminations in India between 2013 and 2019. Using quarterly bilateral data of 138 foreign investors’ home countries (FIHCs), our difference-in-differences (DD) estimates uncover a significant reduction in FDI inflows to India in response to BIT terminations by more than 30 percent compared to countries without terminations. We identify the sudden break with investor protection for new investments as the major transmission channel. Further investigations suggest that investors do not necessarily abandon India in response to BIT terminations but apparently reroute FDI via FIHCs with BITs. Evidence from firm-level data reveals that investors revoke or reroute mainly deals (e.g. mergers and acquisitions) rather than own new projects. Moreover, similarity of some legal institutions with India offsets the negative effect of BIT terminations.

本研究利用 2013 年至 2019 年间印度 44 次单边 BIT 终止的随机时间确定双边投资条约 (BITs) 对外国直接投资 (FDI) 的影响。使用 138 个外国投资者母国的季度双边数据 ( FIHCs），我们的差异差异 (DD) 估计显示，与未终止 BIT 的国家相比，印度的 FDI 流入量因 BIT 终止而显着减少了 30% 以上。我们认为，投资者对新投资的保护突然中断是主要的传播渠道。进一步的调查表明，投资者不一定会因为 BIT 的终止而放弃印度，但显然会通过具有 BIT 的 FIHC 重新安排 FDI。来自公司层面数据的证据表明，投资者主要撤销或重新安排交易（例如 并购）而不是拥有新项目。此外，一些法律制度与印度的相似性抵消了双边投资协定终止的负面影响。