Can Signaling Attract Foreign Direct Investment? Effect of International Mega-Events in China

This paper explores the impact of signaling on foreign direct investment (FDI) by taking international mega-events hosted in different cities in China as a quasi-natural experiment. The empirical research shows that hosting international mega-events increases FDI in the host cities. Moreover, the higher the cost of international mega-events is, the more FDI flows in. Interestingly, FDI in non-host cities in host provinces also increases. As the FDI inflow to non-host cities is not attributable to activities directly related to the international mega-events themselves, signaling likely plays a significant role