Borrowing Capacity and Foreign Direct Investments
Dr. Mark Wheeler
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.
WMU ScholarWorks Citation
Sarnstrom, Todd II, "Borrowing Capacity and Foreign Direct Investments" (2015). Research and Creative Activities Poster Day. 172.