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Financial determinants of FDI

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Author

Summary, in English

We argue that mainstream FDI theory underplays financial motivations for international investment, and suggest several possible channels for a distinct cost-of-capital effect on FDI. Using a sample of European firms’ cross-border acquisitions, and controlling for traditional firm-level determinants of FDI, we find strong evidence in favor of a cost-of-equity effect, whereas the effect of debt costs is indeterminate. We further find that financial determinants are more important for firms originating in

relatively less financially developed countries and for firms with high knowledge intensity.

Publishing year

2008

Language

English

Document type

Working paper

Publisher

IFN Working Paper series

Topic

  • Business Administration
  • Economics and Business

Keywords

  • FDI
  • cross-border acquisitions
  • investment-q
  • cost of capital
  • crosslisting
  • segmentation

Status

Unpublished