How Does Country Risk Matter for Foreign Direct Investment?

Hayakawa, Kazunobu; Kimura, Fukunari; Lee, Hyun Hoon

doi:10.1111/deve.12002

Cited by 127 publications

(102 citation statements)

References 18 publications

(16 reference statements)

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“…It indicates that the external position of the economy is good which increases the investor confidence. Hayakawa, Kimura and Lee (2011) found an insignificant impact of financial risk on FDI flows for a panel of 93 countries.…”

Section: Credit Worthinessmentioning

confidence: 95%

Macroeconomic Determinants of Foreign Direct Investment: Evidence from India

Dua¹,

Garg²

2015

jda

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This study examines the macroeconomic factors underlying FDI flows to India using cointegrating VAR with I(1) exogenous variables. The results indicate that conventional determinants such as a depreciating exchange rate, higher domestic returns, higher domestic output and better infrastructure are conducive to FDI flows to India. The results also indicate that macroeconomic instability has adverse effects while credit worthiness is conducive to FDI flows. A negative relation between trade openness and FDI is observed suggesting that FDI flows to India may be tariff jumping in nature. Empirical estimates also indicate that an increase in global FDI flows to other emerging economies reduces FDI flows to India indicating that India competes with other emerging economies in receiving FDI. Further, the results show that higher foreign output is conducive to FDI flows indicating procyclicality of FDI with economic performance of foreign countries. JEL Classifications: F21, C32

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Section: Credit Worthinessmentioning

confidence: 95%

Macroeconomic Determinants of Foreign Direct Investment: Evidence from India

Dua¹,

Garg²

2015

jda

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“…Most studies indicate that political stability may have a positive effect on the incoming FDI (Busse & Hefeker, 2007;Hayakawa, Kimura, & Lee, 2011;Wei, 2000). Also, the high sunk cost of FDI is associated with uncertainties, including the political uncertainty, and makes investors highly sensitive in their investment decisions (Walsh & Yu, 2010).…”

Section: A Panel Data Analysis 150mentioning

confidence: 99%

Exchange Rate Risk, Political Environment and Chinese Outward FDI in Emerging Economies: A Panel Data Analysis

Li¹,

Liu²,

Jin³

2015

JEW

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This study attempts to investigate the effect of financial and political risk on Chinese outward FDI activities in 56 emerging economies for a period from 2003 to 2013. Exchange rate is taken as a main indicator of financial risks and political risks are evaluated using ICRG (International Country Risk Guide) index. Generalized method of moments with panel data of Chinese outward FDI (foreign direct investment) in new emerging economies is used to find how Chinese firms intend to invest abroad with respect to exchange rate level, volatility, and expectation. The major findings show that RMB appreciation proved to have a positive effect on Chinese outward FDI in emerging economies. But Chinese OFDI (outward foreign direct investment) seems not to respond to exchange rate volatility.The expectation of RMB's appreciation has positive effect on Chinese OFDI in emerging economies. Results also show that more political risk leads to more Chinese OFDI in emerging economies.

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“…The author concluded that political risk is unrelated to ROA of the companies. Hayakawa et al (2011) examined the impact of various components of political as well as financial risk on inward FDI, from both long-and short-run perspectives, using risk indices from PRS. The paper employs the dynamic Generalized Method of Moments (GMM) estimator with data from 90 countries for the period 1985-2007 and focused most of their findings on developing countries.…”

Section: Literature Reviewmentioning

confidence: 99%

The Impact of Political Risk on Foreign Direct Investment

Khan¹,

Akbar²

2013

IJEF

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Political risk, like all other risks, has an adverse effect on any economy. Even though other forms of risk, such as economic risk and financial risk have been studied quite extensively, political risk has not received much attention owing primarily to lack of data. The current paper attempts to study a negative and significant relationship between political risk and Foreign Direct Investment (FDI), accounting for 94 countries over a span of 24 years from 1986-2009. It was found that most of the political risk indicators have a negative relationship with FDI for the world as a whole and also, the high-income countries but the relationship was the strongest for the upper middle-income countries.

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How Does Country Risk Matter for Foreign Direct Investment?

Cited by 127 publications

References 18 publications

Macroeconomic Determinants of Foreign Direct Investment: Evidence from India

Macroeconomic Determinants of Foreign Direct Investment: Evidence from India

Exchange Rate Risk, Political Environment and Chinese Outward FDI in Emerging Economies: A Panel Data Analysis

The Impact of Political Risk on Foreign Direct Investment

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