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Corporate financial determinants of foreign direct investment

Forssbaeck, Jens LU and Oxelheim, Lars LU (2011) In Quarterly Review of Economics and Finance 51(3). p.269-282
Abstract
Financial market incompleteness and (partial) segmentation of financial markets internationally may endow some firms with a financial advantage which can be exploited through foreign direct investment. We argue that this advantage appears as a distinct cost-of-capital effect on FDI, and identify possible channels for such an effect. Using a sample of European firms’ cross-border acquisitions, and controlling for traditional firm-level determinants of FDI, we find strong support for a cost-of-equity effect, whereas the effect of debt costs is indeterminate. Moreover, financial FDI determinants are more important for firms with high knowledge intensity and for firms resident in relatively less financially developed countries.
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author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
FDI, Cross-border acquisitions, Investment-q, Cost of capital, Cross-listing, Segmentation
in
Quarterly Review of Economics and Finance
volume
51
issue
3
pages
269 - 282
publisher
Elsevier
external identifiers
  • scopus:80051576512
ISSN
1062-9769
DOI
10.1016/j.qref.2011.05.002
language
English
LU publication?
yes
id
6cd11bd5-e971-4660-9db1-87d82619b769 (old id 2064955)
date added to LUP
2011-08-23 15:47:42
date last changed
2017-07-23 03:11:42
@article{6cd11bd5-e971-4660-9db1-87d82619b769,
  abstract     = {Financial market incompleteness and (partial) segmentation of financial markets internationally may endow some firms with a financial advantage which can be exploited through foreign direct investment. We argue that this advantage appears as a distinct cost-of-capital effect on FDI, and identify possible channels for such an effect. Using a sample of European firms’ cross-border acquisitions, and controlling for traditional firm-level determinants of FDI, we find strong support for a cost-of-equity effect, whereas the effect of debt costs is indeterminate. Moreover, financial FDI determinants are more important for firms with high knowledge intensity and for firms resident in relatively less financially developed countries.},
  author       = {Forssbaeck, Jens and Oxelheim, Lars},
  issn         = {1062-9769},
  keyword      = {FDI,Cross-border acquisitions,Investment-q,Cost of capital,Cross-listing,Segmentation},
  language     = {eng},
  number       = {3},
  pages        = {269--282},
  publisher    = {Elsevier},
  series       = {Quarterly Review of Economics and Finance},
  title        = {Corporate financial determinants of foreign direct investment},
  url          = {http://dx.doi.org/10.1016/j.qref.2011.05.002},
  volume       = {51},
  year         = {2011},
}