Property Rights Institutions, Foreign Investment, and the Valuation of Multinational Firms

We examine common stock price reactions to offshore capital expenditures undertaken by U.S. multinational firms. Arguments based on optionality and expropriability lead to predicted price reactions conditioned on the degree of ambiguity in property rights enforcement in the host country. Our findings based on 159 foreign investment decisions reveal a significant influence of property rights ambiguity on the valuation effect. For investment in countries where property rights are enforced as reliably as in the U.S., firms experience an average increase in equity value of $41.83 million, or $1.614 per dollar invested. For countries with greater ambiguity in enforcement, firms experience an average loss of $39.28 million. Controlling for risk, leverage and differential taxes, we find that property rights ambiguity is the dominant explanatory factor for the market’s reaction to these decisions.

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US Environmental Regulation and FDI: Evidence from a Panel of US-Based Multinational Firms

American Economic Journal Applied Economics ◽

10.1257/app.2.3.158 ◽

2010 ◽

Vol 2 (3) ◽

pp. 158-189 ◽

Cited By ~ 66

Author(s):

Rema Hanna

Keyword(s):

Foreign Investment ◽

Multinational Firms ◽

Clean Air Act ◽

Econometric Models ◽

Substantial Variation ◽

Firm Level ◽

Level Data ◽

Regulated Firms ◽

Firm Level Data ◽

Clean Air

This paper measures the response of US-based multinationals to the Clean Air Act Amendments (CAAA). Using a panel of firm-level data over the period 1966–1999, I estimate the effect of regulation on a multinational's foreign production decisions. The CAAA induced substantial variation in the degree of regulation faced by firms, allowing for the estimation of econometric models that control for firm-specific characteristics and industrial trends. I find that the CAAA caused regulated multinational firms to increase their foreign assets by 5.3 percent and their foreign output by 9 percent. Heavily regulated firms did not disproportionately increase foreign investment in developing countries. (JEL F23, K32, L51, Q52, Q53, Q58)

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Intellectual Property Rights and Foreign Investment: The Political Economy of Taiwan's Technology-Intensive Foreign Direct Investment

Asian Politics & Policy ◽

10.1111/j.1943-0787.2009.01150.x ◽

2009 ◽

Vol 1 (4) ◽

pp. 726-738 ◽

Cited By ~ 1

Author(s):

Douglas B. Fuller

Keyword(s):

Political Economy ◽

Foreign Direct Investment ◽

Intellectual Property ◽

Property Rights ◽

Intellectual Property Rights ◽

Foreign Investment ◽

Direct Investment ◽

The Political

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Promoting Foreign Direct Investment in the Indo-Pacific Region: Scope and Opportunities

India Quarterly A Journal of International Affairs ◽

10.1177/0974928419874550 ◽

2019 ◽

Vol 75 (4) ◽

pp. 490-509

Author(s):

Durairaj Kumarasamy ◽

Prabir De

Keyword(s):

Foreign Direct Investment ◽

Foreign Investment ◽

Value Chain ◽

Direct Investment ◽

Multinational Firms ◽

Global Value Chain ◽

Pacific Region ◽

International Sourcing ◽

The World ◽

Investment Barriers

Indo-Pacific construct has picked up a motivating pace in recent years. Several countries across the world have shown their interest in joining the Indo-Pacific region. Indo-Pacific region has been the world’s leading source and destination of foreign investment. This article analyses the trends in investment, bilateral and multilateral investment engagements and investment barriers and presents a way to promote foreign direct investment (FDI) in the Indo-Pacific region. It also examines India’s investment relations with some of the Indo-Pacific countries. Further, it looks into the inter-linkages between FDI and global value chain, given that multinational firms play a significant role in bringing international sourcing, technology sharing, and production networking across countries.

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