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Corporate financial determinants of foreign direct investment

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Author

Summary, in English

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.

Publishing year

2011

Language

English

Pages

269-282

Publication/Series

Quarterly Review of Economics and Finance

Volume

51

Issue

3

Document type

Journal article

Publisher

Elsevier

Topic

  • Business Administration

Keywords

  • FDI
  • Cross-border acquisitions
  • Investment-q
  • Cost of capital
  • Cross-listing
  • Segmentation

Status

Published

ISBN/ISSN/Other

  • ISSN: 1062-9769