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Relative Access to Credit, Relative Wealth and FDI: Firm-Level Evidence from Japanese FDI into the United States

  • Alba, Joseph D.

    ()

    (Nanyang Technological University)

  • Wang, Peiming

    ()

    (Auckland University of Technology)

We use data on 317 Japanese firms to examine the effect of relative access to credit and relative wealth on the Japanese firm’s rate of foreign direct investment (FDI) in the United States. Using the zero-inflated negative binomial model, we find that multiple rating downgrades of a firm’s main bank significantly affected the Japanese firm’s rate of FDI in the United States. This result holds for firms with the highest 20% of bonds-to-liabilities ratio indicating that banking problems in Japan affected even firms who could have financed their FDI with bonds. We also find that the firm’s rate of FDI is affected by the firm’s relative wealth.

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Article provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.

Volume (Year): 22 (2007)
Issue (Month): ()
Pages: 231-255

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Handle: RePEc:ris:integr:0393
Contact details of provider: Web page: http://www.e-jei.org/

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