Special Issue "Multinational Capital Budgeting"

A special issue of Journal of Finance and Economics

Deadline for manuscript submissions: (February 28, 2014)

Special Issue Editor(s)

Chief Guest Editor

Dr. Fabio Pizzutilo
University of Bari – Dept. of Business and law studies
Email: fabio.pizzutilo@uniba.it

Special Issue Information

Capital budgeting for foreign direct investments carries complexities that do not affect the corporate decision process for domestic projects: exchange rate fluctuations, political and financial risk of the host country, cost of capital and optimal capital structure in an international setting, differences between project and parent company cash flows, foreign tax regulations, host government controls, etc.. This special issue is of interest in original high quality theoretical and empirical studies that give a relevant contribution to the existing literature on multinational capital budgeting subject by analyzing the relevant variables that affect the capital budgeting for foreign direct investments and by developing models aiming at handling the complexities associated with non domestic business.

Keywods

  • Foreign direct investment under uncertainty;
  • Choice, timing and localization of foreign direct investments;
  • Foreign markets entry mode choices and exit decisions;
  • Corporate currency exposure and foreign direct investments ;
  • Management of the operating, transaction and translation exchange rate exposure;
  • Parent versus project perspective for the valuation of foreign direct investments;
  • Political risk (in all its forms) and multinational capital budgeting;
  • Valuing political risk for multinational enterprises;
  • Greenfield investments versus cross border merger and acquisitions;
  • Payment methods for cross border merger and acquisitions;
  • International joint ventures;
  • Agency costs and foreign direct investments;
  • Taxation complexities in the multinational capital budgeting context;
  • Real option approaches to multinational capital budgeting;
  • Analysis of multinational enterprises strategies through real options ;
  • Real options in multinational decision making;
  • Valuing the operating flexibility of multinational enterprises;
  • International capital asset pricing models;
  • Capital structure puzzle for multinational enterprises ;
  • Multinational capital budgeting for banks and other financial institutions;
  • Multinational capital budgeting for foreign direct investments in emerging countries;
  • Multinational capital budgeting for foreign direct investments in developed countries;
  • Multinational enterprises corporate risk management;
  • Assessing the impact of the recent financial crises on foreign direct investment and on the multinational capital budgeting process
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Published Papers

   
Abstract: This paper investigates whether foreign subsidiaries outperform their parent banks in terms of profitability and what determines this outcome. Using a sample of multinational banks and their subsidiaries in a large number of countries, this study shows that, on average, foreign subsidiaries are less profitable than their parent banks. However, the results show that foreign subsidiaries tend to perform better than their parent banks if they are well capitalized, have low overhead costs and loss low provision. I find also show that foreign subsidiaries tend to perform better than their parent banks if the latter are underperforming in the home market. While, the legal distance between host country and host country is an important determinant of the profitability of the subsidiary in relation to its parent bank, to a lesser extent, are the host market’s characteristics. Finally, foreign banks are more likely to outperform parent banks in developing markets than in developed countries. However, different bank and host country determinants influence the profitability of the subsidiaries in these countries.
Abstract: The effective exchange rate is a measure of whether or not the currency is appreciating or depreciating against a basket of foreign currencies. In this paper an attempt has been taken to enquire the relationship between exchange rate and trade balance in India, here we use we use 36 currency trade based effective exchange rate both nominal and real. A decline in the value of effective exchange rate implies a depreciation of the home currency against the basket of currencies. The data are taken from statistical hand book of published by RBI. The variables in this study are Trade Balance, Nominal Effective Exchange Rate, Real Effective Exchange Rate. Trade balance is measured by taking the ratio of import and export then converted in to logarithmic form, so trade balance implies log import – log export. This study shows that increase of trade balance of our country is one of the important reasons for depreciating our currency. Since trade balance is the ratio of import and export hence increase in trade balance implies more of import and or less of export is one of the important reasons for depreciation of our currency over the time period of the study.
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Abstract: This paper accounts for the political determinant of foreign direct investment (FDI) inflows for 31 Upper-Middle-income Countries (UMCs) over the period of 1990-2011. By measuring the types of regime along an autocracy-democracy spectrum, we empirically investigate how the quality of political institutions in host countries can impact the level of political risks perceived by foreign investors and Multinational Corporates (MNCs). The dynamic panel ‘‘difference’’ GMM estimator proposed by Arellano and Bond (1991) is developed to deal with auto-correlation problems and endogeneity of the variables in the models. The empirical findings indicate that democracy enhances FDI toward UMCs. Indeed, its positive effect on FDI inflows is remarkable compared to other economic control variables accounted for in this paper.
Abstract: The competitive advantages of foreign direct investment can be largely dependent on location. In this study, we develop an innovative model to deal with this crucial step for any multinational involved in expanding its operations abroad. The model has a pure financial perspective and is based on a binomial approach. An application of the model explores its practical implementation and outlines the extent to which different financial variables impact on the location choice of foreign direct investment.
Abstract: The net present value of any loan at its own discount rate is shown to be zero in both pre tax and after tax worlds. This allows separation from any investment net present value analysis. Further, it simplifies the analysis and it is argued is appropriate even in weighted average cost of capital scenarios wherein the cost of a loan has a marginal cost of capital equal to its own after tax discount rate and remains a zero in terms of its own net present value.
Abstract: The objective of this paper is to analyze the procedures used by multinational enterprises to distribute the income generated by their subsidiaries abroad. Also, the paper intends to answer the question how multinational firms allocate taxes paid on this income among the fiscal jurisdictions in which they operate. In this study, the analytic research method was applied, by revising the available literature in order to determine how income-shifting works, as a fiscal strategy applied by MNEs. It is concluded that MNEs use organizational strategies to take advantage of the comparative advantages of the different countries in which they operate, and, as a result, an intercompany trade takes place.
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