Financial and political risks in US direct foreign investment

• 成果类型: Article
• 署名作者: Click, RW
• 署名单位: George Washington University
• 刊物名称: JOURNAL OF INTERNATIONAL BUSINESS STUDIES
• ISSN/ISSBN: 0047-2506
• DOI: 10.1057/palgrave.jibs.8400157
• 发表日期: 2005
• 页码: 559-575
• 关键词: direct foreign investment; financial risk assessment; political risk assessment; return on assets ( ROA); global vs multinational capital allocation; random effects estimation of panel data; residual analysis

摘要

This paper examines the risk of US direct foreign investments over the period 1982-98 in 59 host countries. The first part of the analysis builds an empirical model to explain the time-series and cross-country patterns of return on capital. The estimation then uses the return on assets (ROA) as a measure of the return on capital, and investigates its determinants. There are four main findings. First, the ROA in a majority of countries does not simply track the worldwide ROA. Second, some cross-country differences are explained by financial risks. Third, unexplained country risk is qualitatively and quantitatively related to unobserved political risk. Fourth, unexplained country risk is also compensated with a higher ROA, enhancing its credibility as a measure of political risk. The unexplained country risk is thus used to calculate a new index of political risk ratings for 56 host countries that may be useful to managers, investors, policymakers, and academics.