Showing papers on "Foreign portfolio investment published in 1983"

Foreign and Domestic Divestment and Investment Decisions: Like or Unlike?

Abstract: The managerial literature on foreign investment and divestment is much less developed than the economic literature on foreign direct investment theory. Nevertheless, surveyed with the purpose of better understanding foreign divestment decisions, the research to date reveals some noticeable differences between investment and divestment divisions—whether foreign or domestic—and even more substantial differences between foreign divestment and domestic divestment decisions. Additional research, however, is clearly in order.

Agency Contracts, Institutional Modes, and the Transition to Foreign Direct Investment by British Manufacturing Multinationals Before 1939

Abstract: This paper analyzes the transition from agents to branch selling as alternative institutional modes for transacting abroad by pre-1939 British manufacturing multinationals. A model to explain the shift between alternative modes is specified in terms of transaction costs. Agent opportunism and contract monitoring costs are the major transaction costs. Besides transaction costs, the frequency of transactions and the accumulation of market-specific knowledge by the principal were found to be important variables.

An Introduction to Stock Exchange Investment

Abstract: Part 1 Investment basics.- Products, markets and players.- Investment return and risk.- Part II Bonds and fixed income.- Bonds and government securities.- Bond strategies.- Part III Equities.- Equities: analysis and valuation.- Portfolio theory.- The capital asset pricing model.- Part IV Risk management products.- Financial futures.- Options.- Part V Institutional and international investment.- Investing institutions.- International investment.- Part VI Strategies and issues.- Investment objectives, strategies and performance.- Current issues in investment theory and practice.

Theories of Foreign Direct Investment

Abstract: Foreign direct investment has been of increasing importance in the world economy, yet there is still no completely satisfactory theory which can explain the phenomenon of world-wide foreign direct investment. Conventional trade theories are not very useful in explaining such a phenomenon. In the classical model of static comparative advantage, goods are assumed to be completely mobile while factors of production are not. With a perfectly competitive world and no barriers to trade, the international transaction of goods and services will ensure optional allocation of resources. There are thus no incentives for foreign direct investment in the sense that the classical theory of trade does not necessitate any trade in factor inputs. To derive theories of foreign direct investment, one has to modify the conventional trade theory and consider the dynamic aspects of comparative advantage. Alternatively, one has to look for other branches of economics such as the micro-economics of the firm, industrial organisation theories, location theories, and capital theories.

On the Determinants of Net Foreign Investment

Abstract: these models do not explain why investments in productive processes in any country exceed or fall short of the wealth of the residents of that country. Most existing models of portfolio choice and asset pricing make the key assumption of a given world market portfolio, which implies that at any point in time net foreign investment itself is given.2 The present paper does not make this assumption. This paper provides a simple model of net foreign investment in a world of perfect markets.3 The model has the useful property that production decisions are made simultaneously with portfolio choice decisions, as in Cox, Ingersoll and Ross (1978). The central feature of the model is that technologies in use differ across countries. It is assumed that pre-existing capital can be shifted costlessly between countries. Production decisions, in other words, decisions about how the existing stock of capital is invested among available technologies, determine net foreign investment in the home country. However, production decisions depend on the distribution of the returns to investments in various technologies. Whereas this paper analyzes an issue which has always been of considerable interest in the field of international finance, it uses a different framework from that used in most of the literature on net capital flows. It recognizes explicitly the role of risk as a determinant of net foreign investment.4 Because political risk is not modeled explicitly, this paper constitutes only a first attempt at understanding the determinants of net foreign investment. Political risk must play a significant role as a determinant of net foreign investment, because net * University of Rochester. I am grateful to the members of the International Finance seminar at the University of Rochester, to Jorge de Macedo, Ron Jones, Don Lessard and especially Pat Reagan for useful conversations and comments and to the center for Research in Government Policy and Business for financial support. ' Net foreign investment in the domestic country is understood to mean the difference between total wealth invested in the domestic country and domestic wealth. It follows that net foreign investment is a stock and not a flow. International economists would call net foreign investment the

New forms of foreign investment in developing countries

Abstract: To a growing extent, since the early 1970s “new forms” of foreign investment have developed which constitute a departure from full ownership of the capital by the foreign investor and the practice of “packaged” management services. What view is to be taken of these new forms of investment from the development policy aspect?

Modern Portfolio Theory and Investment Management

Abstract: Modern Portfolio Theory (MPT) had its origins in the U.S.A. during the 1950’s, and grew out of attempts by researchers (most notably Markowitz 1952, 1959 and Tobin 1958) to find mathematically ‘efficient portfolios’, that is, security combinations which resulted in maximum expected returns for given levels of risk (normally measured by the variance of investment returns). Unfortunately, the excessive computational requirements as well as the sophisticated mathematics underlying MPT, prevented this academic work from reaching the investment community for most of the 1950’s and 1960’s. Fortunately, the increasing availability (and decreasing costs) of both financial information and computational capacity of computers has now resulted in the widespread use of MPT by academics and practitioners alike, especially in the U.S.A.

Foreign Investment in U.S. Food-Retailing Industry

Abstract: Much of the literature on foreign investment focuses on manufacturing industries. A number of plausible theories have been proposed and to some extent tested concerning foreign investment in manufacturing. However, the body of literature has little to say about foreign investment in retailing. In part, this may reflect the relative unimportance of such investments vis-a-vis those in manufacturing. This paper examines the nature and extent of foreign investment in U.S. food retailing, the characteristics of foreign firms that have invested, the economic forces that appear to have influenced foreign investments, and the impact of these investments on U.S. firms and markets. Foreign direct investment in the U.S. foodretailing sector is largely a phenomenon of the past decade. With the exception of the entrance into the U.S. market by the Canadian firm, George Weston, entry by non-U.S. firms did not occur until the 1970s. In fact, the first three firms to enter the U.S. market were primarily food or tobacco manufacturers (George Weston, Cavenham, British-American Tobacco). It was not until 1974 that foreign firms that were primarily food retailers entered the U.S. food-retailing market. Table 1 gives a breakdown of foreign investments in the U.S. food-retailing industry according to the home country of the investor. The table indicates that the overwhelming majority of sales of foreign-owned food-retailing affiliates is accounted for by five European countries-Germany, the United Kingdom, France, Netherlands and Belgium-plus Canada. The percentage of foreign investment accounted for by Canadian investors dropped sharply from 100% in 1971 to 9% in 1980 as nearly all the investments during the 1970s came from European countries. The recent interest of European firms in forign investments in U.S. food retailing stems i part from the characteristics of European food retailing. The supermarket revolution hit major European countries considerably later than in the U.S. For example, whereas the United States had about 125 supermarkets per million population in 1963, European countries had less than 10 per million. By 1972, the figures were 164 for the United States versus 38 to 55 for major European countries (Commission of the European Communities; Euromonitor Review-1973). Between 1961 and 1971, the number of supermarkets in six European countries (Belgium, Italy, Germany, France, Netherlands, U.K.) increased twenty times; from 1971 to 1975 another 50% increase in numbers occurred. The sales of European retailing firms indicate that growth was brisk throughout the 1970s. In 1971, only two of the ten leading European grocery chains had sales over $500 million. By 1980, the sales of all but one of the ten exceeded $2 billion. On average, their 1980 sales were eight times their 1971 sales (Euromonitor Review 1975; Moody's International Manu l). By comparison, the twentieth largest U.S. grocery chain had sales of $561 millio in 1971 and $1.2 billion in 1980. Whereas in 1971, only two of the ten European chains were comparable in sales volume to the top twenty ,U.S. chains, by 1980 all ten had comparable sales volume ("Annual Report of the Grocery Industry" 1973, 1982). The substantial increase in the size of these firms may have given them the financial and organizational resources to undertake foreign investments. Five of the ten companies invested in the United States during the 1970s. Because of the size of the U.S. market and Bruce Marion is an agricultural economist, Economic Research Service, U.S. Department of Agriculture and a professor of agricultural economics, University of Wisconsin. Howard Nash is a project assistant in the Department of Agricultural Economics, University of Wisconsin. The views expressed in this paper do not necessarily reflect those of the USDA. An NC117 working paper contains many of the supporting tables and documentation for this paper (Marion and Nash).

Foreign Investment in the U.S. Food-Marketing System: Discussion

Abstract: The three papers presented at this session discuss several aspects of foreign direct investment (FDI) in food industries. My comments address one of these themes, the applicability of the theory of FDI to these industries. First, I present a synthesis of what is generally called the eclectic theory of FDI (Dunning). My approach differs somewhat in emphasis from Connor or Pagoulatos. Second, I review the studies of FDI in food and tobacco manufac-

Portfolio Theory and the Management of Investment Trust Companies

Abstract: The last ten to fifteen years have seen significant changes in attitudes to portfolio management. In part this has been due to the increasing dominance of the stock exchange by the investment decisions of those managing institutional portfolios. However, part has undoubtedly been the result of academic work which generally suggests portfolio investment strategies substantially different from those followed by many investment managers.

Foreign Investment in the U.S. Food Marketing System: Discussion

Abstract: At the risk of sounding unscholarly, the opening line can well be, "So what else is new?" Big companies invest and develop markets wherever they can by whatever means is available or can be contrived. They exhibit no chauvinistic concern for national boundaries. Their transnational aggressions can disturb both bureaucrats and economists, for the trenchant reason that our economic thinking is geared to the political unit that marks our era in history, namely, the nation-state. We are not schooled for global geo-economic analysis.