Herding in foreign direct investment

This paper, to our knowledge, is the first to examine herding in foreign direct investment (FDI). We investigate it from two perspectives, first the number of countries investing in the host country and then the dollar volumes of those investments. Our results provide strong evidence of herding in FDI. We also show herding in the divestures of these investors. We show that herding in FDI is related to host country characteristics and governance parameters. •We find herding behaviour in corporate decisions regarding foreign direct investment.•Herding is observed in FDI with a greater tendency to herd in divestments.•Herding happens more towards countries with poor country governance.•Herding also increases with low information and at great distance.•Herding in divestments occurs in smaller FDI destinations which can be destabilising.