German Multinationals in Europe: Patterns and Perspectives

Regional Economic Integration and Foreign Direct Investment: The Case of German Investment in Europe

“…There are sizeable, significant effects from both the growth in real equity prices and profitability, with a 1 per cent rise in profitability generating an expansion in foreign investment of 0.75 per cent. This suggests that financial factors have had an important influence on the timing and scale of direct investment by German companies, confirming the findings from the case studies cited by Heiduk and Hodges (1992).02) These terms should be seen primarily as indicators of the extent to which changes in domestic financial conditions affect the timing and the size of the flow of direct investment. As neither can be expected to trend permanently over time they cannot be the primary factor behind the continuing upward trend in the stock of investment.…”

“…We investigate the role of both these factors in this study. Fluctuations in domestic profitability and interest gearing have already been shown to have a significant effect on the level of foreign investment by US and UK firms (Barrell and Pain (1996) and Pain (1997)) and Heiduk and Hodges (1992) suggest that planned foreign investments are reduced before domestic ones at times of financial distress. Profitability is measured using the rate of return on capital in the German business sector, as reported by the OECD.…”

Determinants of German Foreign Direct Investment in Latin American and Asian Emerging Markets in the 1990s

“…The relevance of the level of corporate profits for Germany is underscored by Heiduk and Hodges (1992) in a case study of the investment activity of German multinationals. The authors purport that, given the higher volatility of foreign compared to domestic investment, German firms facing financial distress tend to trim FDI before they decrease domestic investment.…”

Have structural factors influenced german FDI in Latin America? A panel econometric analysis for the 1990s

“…Barrell and Pain (1996) add to their regressions for outward U.S. FDI lagged corporate profits (significantly positive). The relevance of the level of corporate profits for Germany is underscored by Heiduk and Hodges (1992) in a case study of the investment activity of German multinationals. The authors purport that, given the higher volatility of foreign compared to domestic investment, German firms facing financial distress tend to trim FDI before they decrease domestic investment.…”