Working Paper Series
Financial Determinants of Foreign Direct Investment
() and Lars Oxelheim
Abstract: We argue that mainstream FDI theory underplays financial
motivations for interna-tional 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.
Keywords: FDI; Cross-border Acquisitions; Investment-q; Cost of Capital; Cross-listing; Segmentation; (follow links to similar papers)
JEL-Codes: E22; F21; F23; G30; L23; (follow links to similar papers)
67 pages, April 1, 2008
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