Excessive FDI Flows under Asymmetric Information
AbstractIn Razin, Sadka and Yuen (1998, 1999a), we explored the policy implications of the home-bias in international portfolio investment as a result of asymmetric information problems in which domestic savers, being "close" to the domestic market, have an informational advantage over foreign portfolio investors, who are "far away" from the domestic market. However, FDI is different from foreign portfolio investment, concerning relevant information about domestic firms. Through the stationing of managers from the headquarters of multinational firms in the foreign direct establishments in the destination countrie under their control. FDIors can monitor closely the operation of such establishments, thus circumventing these informational problems.
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Bibliographic InfoPaper provided by Tel Aviv in its series Papers with number 27-99.
Length: 22 pages
Date of creation: 1999
Date of revision:
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Postal: Israel TEL-AVIV UNIVERSITY, THE FOERDER INSTITUTE FOR ECONOMIC RESEARCH, RAMAT AVIV 69 978 TEL AVIV ISRAEL.
Web page: http://econ.tau.ac.il/research/foerder.asp
More information through EDIRC
FINANCIAL MARKET ; INVESTMENTS ; ASYMETRIC INFORMATION;
Other versions of this item:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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