Multinationals as Arbitrageurs: The Effect of Stock Market Valuations on Foreign Direct Investment

• 成果类型: Article
• 署名作者: Baker, Malcolm; Foley, C. Fritz; Wurgler, Jeffrey
• 署名单位: New York University; National Bureau of Economic Research; Harvard University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhn027
• 发表日期: 2009
• 页码: 337
• 关键词: BOOK-TO-MARKET; exchange-rates; cross-section; equity; returns; funds; WORLD; equilibrium; integration; bubbles

摘要

Empirical evidence of imperfect integration across world capital markets suggests a role for cross-border arbitrage by multinationals. Consistent with multinational arbitrage as a determinant of foreign direct investment (FDI) patterns, we find that FDI flows increase sharply with source-country stock market valuations-025EFparticularly the component of valuations that is predicted to revert the next year, and particularly in the presence of capital account restrictions that limit other mechanisms of cross-country arbitrage. The results suggest the existence of a cheap financial capital channel in which FDI flows reflect, in part, the use of relatively low-cost capital available to overvalued parents in the source country.