Foreign direct investment and financial markets influences: Results from the United States

Burhan F. Yavas and Rama Malladi

The North American Journal of Economics and Finance, 2020, vol. 53, issue C

Abstract: This paper investigates the linkages among Foreign Direct Investment (FDI-greenfield and mergers and acquisitions (M&A)) decisions and equity market returns and volatilities. The central premise is that FDI decisions by Multinational Enterprises (MNE) are influenced, among other factors, by risk and uncertainty indicated by equity market returns and volatilities in the destination (host) countries. This is because of the events on the stock markets in general, and their volatilities, in particular, signal the vitality of the investment climate of the target country. Including capital market variables among the determinants of FDI is important for assessing the cost of capital and for evaluating direct investment and asset allocation decisions.

Keywords: Equity returns and volatilities; FDI decisions; Supply chains; M&A (search for similar items in EconPapers)
JEL-codes: C58 F21 F23 G11 G15 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:53:y:2020:i:c:s1062940820300796

DOI: 10.1016/j.najef.2020.101182

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