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Borrowing Capacity and Foreign Direct Investments

Faculty Mentor

Dr. Mark Wheeler



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Literature on Foreign Direct Investment (FDI) has highlighted firm productivity as a barrier to FDI. However, FDI also entails large, up-front costs. Firms may need to seek external sources of financing to take on these costs. A firm’s ability to obtain external financing is known as borrowing capacity. Firm characteristics, such as productivity and available collateral, help determine borrowing capacity. This study incorporates borrowing capacity into a model of a firm’s FDI decision. Firms with greater borrowing capacity are expected to be more likely to participate in FDI. This hypothesis is tested using firm-level data on Japanese multinational firms.


This poster was presented at the 2015 Western Michigan University Research and Creative Activities Poster Day. The poster and abstract are currently unavailable through ScholarWorks.

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