Liquidity-driven FDI

Arbeitspapier

We develop a model of foreign direct investment (FDI) in which financially liquid foreign firms acquire liquidity-constrained target firms. Using a large dataset of emerging-market acquisitions, we find evidence supporting three central predictions of the model: (i) firms in external finance dependent and intangible sectors are more likely to be targets of foreign acquisitions; (ii) these targets have ownership structures with larger foreign stakes; (iii) these effects are most prominent in countries with low levels of financial development. The regression evidence indicates that liquidity is at least as economically important as technology- or trade-related motives for FDI in emerging-market economies.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Graduate Institute of International and Development Studies Working Paper ; No. 17/2014

Classification and Topics

• Classification: Wirtschaft ; International Investment; Long-term Capital Movements ; Multinational Firms; International Business ; Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance ; Contracting Out; Joint Ventures; Technology Licensing ; Industry Studies: Manufacturing: General
• Subject: foreign direct investment ; cross-border mergers and acquisitions ; financial development ; external finance dependence ; asset tangibility ; emerging markets

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Alquist, Ron ; Mukherjee, Rahul ; Tesar, Linda L.
• Event: Veröffentlichung
• (who): Graduate Institute of International and Development Studies
• (where): Geneva
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/122098
• Last update: 10.03.2025, 11:43 AM CET