The impact of exchange rate risk on the foreign direct investment of U.S. multinational manufacturing companies

Gregory Clare

Open Economies Review, 1992, vol. 3, issue 2, 143-163

Abstract: This paper extends the examination of the effects of exchange rate risk on the foreign direct investment decision of U.S. multinationals in manufacturing. It does so by explicitly developing a model which incorporates exchange rate risk into the objective function of the firm and tests the model on cross-sectional data over the years 1974 to 1977 for investment in both developed and less developed countries. These are the only years for which data on all crucial variables are available. In all cases the risk aversity hypothesis was substantiated and the same model was appropriate for both developed and less developed countries. Copyright Kluwer Academic Publishers 1992

Keywords: foreign direct investment; exchange rate risk; parent's participation; foreign market (search for similar items in EconPapers)
Date: 1992
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DOI: 10.1007/BF01886201

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