1.0 Introduction
Based on OECD Factbook 2013: Economic, Environmental and Social Statistics, Foreign direct investment defined as cross-border investment by other investors from the economy that had the objective to gain long term interest or benefit from other countries that need capital for development. FDI have divided into 3 categorty such as Horizontal FDI, plaform FDI and vertical FDI. Kimberly state that Foreign direct investment is global economic growth which are apply in all countries such as developing and emerging market countries. The main purpose of FDI that the investor from other countries invests the surplus capital to other countries to gain benefit. At same time, the developing countries will gain more advanatge on capital, technology transfer and human skill that increase the development of the countries.
The developing country always needs the fund or financial aid from all resources for developing their country. FDI are made by the multinational companies for the expansion towards the developing countries based on the country’s condition. What is foreign direct investment (FDI)? Foreign direct investment is the investment made by the multi-national company into other country through fund or investments which directly invest into the company. Foreign direct investment is different from indirect investment such portfolio flows or equities listed on a nation's stock exchange. FDI is divided into horizontal, vertical and conglomerate. Besides that, FDI can used to take over other country companies and Greenfield entry. The International Monetary fund (1977) mentioned that FDI is a investment that made to acquire a lasting interest in an enterprise operating in an economy by the investor which interest for havi...
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...rovide as be the introduction and the objective of our research while the chapter 2 will preview the literature review which related to previous study about relationship between the stock price and foreign direct investment. In chapter 3, the Methodology of our study will provide as the guideline for chapter 4 and 5. . While in chapter 4 and 5, we will come out with the result and make a conclusion based on the result that we get.
1.6 Methodology
In this study, we estimate the relationship between stock market and FDI which are in the long-term relationship by using Johnansen cointergration approach. Besides that, we measure the short term relationship between stock market and FDI by using using var approach. The variable in this study are the stock market trade volume, exchange rate, inflation rate and foreign direct investment from Indonesia, china and Malaysia
Zheng, P. (2009). A comparison of FDI determinants in China and India. Thunderbird International Business Review, 51(3), 263-279. doi:10.1002/tie.20264
Flow of money for the purpose of investments from one country to another country is called as Foreign Direct Investments. It is an investment made by a company based in one country for long lasting interest or controlling stake into a company in a foreign country. The nature of FDI could be either be inward or outward. Inward FDI refers to direct investments flowing into the home country from foreign land, and outward FDI refers to home country making direct investments in foreign land. The difference between inward FDI and outward FDI is net FDI inflow. Net FDI inflow could be either positive or negative based on the investments flowing between countries.
C/E/110. FDI in emerging economies: the case of EECThe paper discusses the importance of inbound FDI for emerging economies. Among the considered benefits are economic growth, the growth of internal market, technological sipll -overs and access to cheap managerial know-how. The paper also considers the motivational forces that push and pull investors to stream their capitals into particular destinations and business areas.
I found this article "Foreign direct investment: Companies rush in with the cash" on the financial times website (www.FT.com) published December 11, 2002 written by John Thornhill. The reason for choosing this article is my personal interest in the Chinese economy and its attractiveness to the foreign investors. Apart from the foreign direct investment this topic has also helped me in understanding the impact of Chinese economy on the global market.
Since foreign aid programs are here to stay, it is important to focus on the enormous potential for foreign aid to be effective. One such way is through augmenting a state’s ability to attract foreign direct investment (FDI). FDI is a good option because it has the potential to be a more long-term solution than pub...
After the financial crisis of 2008 there has been a dramatic decrease of foreign direct investment (FDI) around the world. Particularly the rapid decline in inflows has affected the recovery speed of FDI around the world. Inflows into Europe contracted by 42% and to North America by 21%, inflows to Australia and New Zealand together declined by 14% 1. However there are few exceptions to the trend, such as the United Kingdom who have managed to keep its FDI attraction. UNCTAD has confirmed that FDI inflows into the UK have risen by 22% 2 over the past year.
We all know that the foreign investment is a necessary part of global expansion. Many developed countries prefer to invest developing countries. For instance, the US has invested much more fund in China. Since the initiation of its market reforms in the 1980’s. China has been a preeminent recipient of foreign direct investment (FDI). Until 2011, there is over $1.2 trillion have been invest in China as foreign direct investment, it made Chinese industries has been transformation, and contributed enormously to the nation’s industrial output. In addition, the more foreign manufactures, the more Chinese subsidiaries have dominated (Wei, Xiao & Yuan, 2014).
FDI is a short form of Foreign Direct Investment which is refers to an investment made to acquire lasting or long-term interest in enterprises operating outside of the economy of the investor. The investment is direct because the investor, which could be a foreign person, company or group of entities, is seeking to control, manage, or have significant influence over the foreign enterprise.
By definition foreign direct investment is the acquisition of tangible assets such as machinery, land and factories; this type of investment are often between two companies- usually multinationals from different countries. FDI is one of the benefits of globalisation as it has a direct impact on aggregate demand having a follow on effect on technology, job opportunities and increased intellectual property owned by countries. In this essay I will discuss some of the factors that affect a country’s disposition to gaining foreign direct investment.
The research identified several factors that may influence stock valuation. The author suggests that government spending is one of the influencers over stock price. This is because state ownership is believed to impose expenses on companies which reduces company profits and stock value. The political system and shareholders can also impact a company’s management. A negative relationship between stock value and management exists if banks become major shareholders of companies. If shareholders are from investment companies, the relationship is positive. This is because banks are influenced by political issues and under pressure of political parties. Institutional investors as shareholders can also control stock price. They can enhance stock value as regulators and with the use of corporate mechanisms. Conversely, if they reduce the value of minority stocks it will reduce their stock value in the long run. A company’s financial health is directly correlated with the level of institutional investors which means that that the higher the level of investors the higher the financial health. Although the influential factors being studied were qualitative they can be explained using models which is why the author used economic models to determine their impact on stock
Furthermore, the relative importance of FDI determinants may change over time, for instance due to globalization. Factors that have been brought out as determinants of FDI in developing countries include political and macroeconomic stability, infrastructure quality, governance, regulatory environment openness to trade and investment promotion strategies (UNCTAD, 1998). However, it is important to note that even though these factors have been empirically proven to be FDI determinants, some determinants may apply to some regions but not others. For instance, on average, countries in Sub-Sahara Africa (SSA) receive less FDI than other regions by virtue of their geographical location (Asiedu, 2002). However, it is important to note that even when factors apply to a particular region, they may not be applicable to a specific country within that
Over the years, foreign direct investment (FDI) has become a popular way for countries to move capital flows from one country to the other. Basically, foreign direct investment simply refers to an instant when a business entity for a particular country invests in an income generating asset in another country with a hope of return on the investment. Foreign direct investment has its benefits to the foreign investor, the home country and the host country (Froot 1993, 60). However, it should be noted that the benefits that come about as a result of FDI can only be possible if all the three parties follow the right regulations and the ethical ways of doing business is strictly adhered to. This paper sheds some light on the costs and benefits of FDIs to the investors, the home country and the host country. In addition, it will also review how the country and the firms’ level of development and growth play a role in determining the costs and benefits accrued from the FDIs (Weigel, Wagal & Gregory 1997, 56).
The main concept discussed in this essay is foreign direct investment. FDI is, according to the OECD, “a category of cross-border investment made by a resident entity in one economy (the direct investor) with the objective of establishing a lasting interest in an enterprise (the direct investment enterprise) that is resident in an economy other than that of the direct investor.” Firms invest in foreign economies in order to exploit their particular advantages and FDI is the preferred process, as opposed to licensing or agreements and exports. The advantages that firms often possess are patented technology, managerial skills, marketing skills and brand names.
Some researchers focused upon the impact of FDI on the different sectors of the economy like agriculture sector, industrial sector, telecommunication, etc., some researchers paid attention to develop different mathematical and statistical model to analyze the role of FDI in economic development. In this study we have collected the data set from the databank of World Bank and have been matched up against the data available on the site of UNCTAD (United Nations- -Conference on Trade and Development). Above two data sources have been chosen because they are the most reliable sources of data and are used by almost every researcher. The data set consists of FDI inflow (US$ mn) and Percentage growth of GDP (in Service Sector) through FDI. The data set is annual and covers the time period of
Sukar, A., Ahmed, S., & Hassan, S. (n.d.). THE EFFECTS OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH. Southwestern Economic Review.