Financial determinants of FDI

Research output: Working paper


We argue that mainstream FDI theory underplays financial motivations for international investment, and suggest several possible channels for a distinct cost-of-capital effect on FDI. Using a sample of European firms’ cross-border acquisitions, and controlling for traditional firm-level determinants of FDI, we find strong evidence in favor of a cost-of-equity effect, whereas the effect of debt costs is indeterminate. We further find that financial determinants are more important for firms originating in
relatively less financially developed countries and for firms with high knowledge intensity.


Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Business Administration
  • Economics and Business


  • FDI, cross-border acquisitions, investment-q, cost of capital, crosslisting, segmentation
Original languageEnglish
PublisherIFN Working Paper series
Publication statusUnpublished - 2008
Publication categoryResearch

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