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Profitability Life Cycle of Foreign Direct Investment: Application to the Czech Republic

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  • Filip Novotný

Abstract

The decisions of foreign direct investors are profit-seeking, so deterioration in the primary income balance of the current account is observed. We estimate the common profitability profile of foreign direct investment (FDI) on a panel of mostly European countries in the period from 1990 to 2015. The FDI profitability life cycle has a non-linear time profile with duration of 16 years. Maximum profitability is reached in the sixth year after the initial investment. We then construct three scenarios for the evolution of total FDI earnings in the Czech Republic depending on the future FDI inflows (changing FDI stock) assumed.

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  • Filip Novotný, 2018. "Profitability Life Cycle of Foreign Direct Investment: Application to the Czech Republic," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(7), pages 1623-1634, May.
    • Handle: RePEc:mes:emfitr:v:54:y:2018:i:7:p:1623-1634
    DOI: 10.1080/1540496X.2017.1316259
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    Cited by:

    1. Petr Prochazka & Iveta Cerna, 2022. "Reinvestment and effective corporate income tax rates in V4 countries," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 17(3), pages 581-605, September.
    2. Septimiu Szabo, 2019. "Foreign Direct Investment in the Czech Republic: A Visegrád Comparison," European Economy - Economic Briefs 042, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Vaclav Broz & Dominika Kolcunova & Simona Malovana & Lukas Pfeifer, 2018. "Risk-Sensitive Capital Regulation," Occasional Publications - Edited Volumes, Czech National Bank, edition 1, volume 16, number rb16/1 edited by Simona Malovana & Jan Frait, January.
    4. Irena Jindrichovska & Erginbay Ugurlu & Eleftherios I. Thalassinos, 2020. "Exploring the Trend of Czech FDIs and their Effect to Institutional Environment," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 94-108.
    5. Golubeva, Olga, 2020. "Maximising international returns: Impact of IFRS on foreign direct investments," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(2).
    6. Michal Franta & Tibor Hledik & Jan Vlcek & Michal Dvorak & Zlatuse Komarkova & Adam Kucera & Vaclav Broz & Michal Hlavacek, 2018. "Interest Rates," Occasional Publications - Edited Volumes, Czech National Bank, edition 2, volume 16, number rb16/2 edited by Jan Babecky & Volha Audzei, January.

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