Foreign investments and firm risk: Evidence from Germany

Napaporn Likitwongkajon and Chaiporn Vithessonthi ()

Global Finance Journal, 2024, vol. 59, issue C

Abstract: Using a sample of publicly traded nonfinancial firms in Germany from 2000 to 2020, we empirically test whether the share of foreign investments positively affects firm risk and the cost of debt. Although the share of foreign investments is positively related to operating risk, it is not related to systematic risk, idiosyncratic risk, or industry-adjusted operating risk. Furthermore, the share of foreign investments is unrelated to the cost of debt or firm performance. If the realized firm risk adequately represents the expected firm risk, our results suggest no relationship between the degree of foreign investments and the expected firm risk. As expected, we find a positive relationship between firm risk and the cost of debt.

Keywords: Foreign investments; Firm risk; Germany; The cost of debt (search for similar items in EconPapers)
JEL-codes: F21 F23 G31 G32 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:59:y:2024:i:c:s1044028324000036

DOI: 10.1016/j.gfj.2024.100931

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