On the behavior of global multinational enterprises during the 1997 Asian financial crisis (original) (raw)
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Japanese direct foreign investment and the Asian financial crisis
Geoforum, 2001
This paper examines the extent to which the Asian currency crisis of 1997±1998 impacted upon the behaviour of Japanese foreign direct investment (FDI) in the manufacturing sector. Much literature has claimed that transnational corporations (TNCs) are unlikely to be ®rmly embedded in the host countries where they operate. If this is the case, then Japanese ®rms in Asia might have exhibited a high degree of disinvestment or plant closure and transfer of operations to other countries following the onset of the ®nancial crisis. Although the events surrounding the Asian crisis and subsequent recovery are still unfolding, FDI data, surveys of Japanese ®rms, and initial reactions by Toyota Motor Corporation and Matsushita Electric Industrial were reviewed to examine this proposition. In general, the evidence suggests that Japanese TNCs have not¯ed Asia bur rather they responded in the following manner. First,¯ows of Japanese FDI into Asia overall held steady throughout ®scal year 1997±1998, although it was set to decline thereafter, at least for the short term. Second, at the level of individual corporations, there is some evidence to show that major ®rms have maintained their operations, and that they have shifted to an export-orientation so as to earn income from their Asian production in overseas currencies. Third, the survey evidence points to a long-term commitment to Asia by Japanese transnationals. Ó
Exchange rates and FDI strategies of multinational enterprises
Pacific-basin Finance Journal, 2011
We examine the role of both the volatility and levels of exchange rates in the determination of multinational enterprises' (MNEs) investments using a unique Korean dataset. These data provide a natural laboratory due to the Korean experience of a severe financial crisis in the late nineties. We find, first, that the behavior of foreign investors in Korea has changed following the 1997 crisis. The change in foreign direct investment (FDI) in response to exchange rate volatility is robust, while that to exchange rate level is quite mixed, which is consistent with recently developed real option-based FDI theory. Second, the effect of exchange rate volatility on FDI is persistent, whereas that of misalignment of level is only temporary, suggesting that MNEs regard volatility as a more generic determinant of foreign investment than misalignment of the exchange rate level. Third, we find strong evidence of nonlinearity between uncertainty and FDI, which may shed some light on why exis...
International Review of Public Administration, 1999
The globalization process has an important impact on the foreign direct investment flows. The FDI are increasingly important to developing countries, such as the Central and Eastern European countries. The EU accession has stimulated the investors' confidence, and it has contributed to their economic development. According to the economic theory, the factors influencing the FDI are numerous and related to the country, sector and company's characteristics. One classification groups these factors in three broad categories: economic policy of host country, economic performance and attractiveness of national economy. In this paper, we point out a new FDI determinant: financial stability. The financial system stability represents an attractive factor for the foreign investors and can be considered as a FDI determinant, alongside the categories mentioned above. Using a large sample of Central and Eastern European countries and panel data techniques, we investigate the impact of the financial stability on the FDI flows. The financial stability's measure is based on a financial stability aggregate index and we use as control variables the number of inhabitants, the trade openness, the labor productivity, and the landing rate. The results show that the stability of the financial systems played a significant role in attracting FDI inflows in Central and Eastern Europe during the 1998-2008 period.
Asian Business & Management, 2007
After the 1997–1998 Asian Financial Crisis, South Korean outward direct investment (ODI) remained at approximately the same level as before the crisis. What explains this remarkable persistence of outward investment, concurrent with a seven-point drop in GDP? After considering contemporary theories of foreign direct investment, this article posits that there are multiple explanations, which are contingent on the size of the firm involved in ODI. For the largest South Korean conglomerates — the five biggest chaebol — foreign investment was a way of opening markets to compensate for declining sales at home, whereas other firms used foreign investment to take advantage of production efficiencies made possible by the financial crisis’s impact in other countries. In relation to South Korea, China represented an investment destination that could absorb both types of investment. The empirical evidence is suggestive, but not conclusive.
Outward foreign direct investment and the financial crisis in developing East Asia
Asian Development Review: Studies of Asian and …, 2009
This paper examines two interrelated aspects of Asian economic dynamism and the management of external shocks, in the context of outward foreign direct investment (FDI) from developing East Asia. Outward FDI from these economies has been growing rapidly, driven by deeper economic integration, more open FDI regimes, growing technological and financial sophistication, and rising savings levels. The paper underlines these common region-wide determinants while pointing to a range of country-specific circumstances. Economic crises, such as the Asian financial crisis of 1997-1998 and the current global financial crisis, have large and unpredictable effects on the behavior of FDI and other forms of capital flow, with the general expectation that FDI will be less volatile than portfolio investment. This has been confirmed in both crisis episodes. Investment outcomes during the current crisis have accelerated the growing importance of developing East Asia in the global economy.
FDI and Government Policy in light of the Asian Financial Crisis
FDI investment continues to play a large role in creating new jobs in East Asia. This paper examines the relationship between FDI, exchange rate changes, and infrastructure spending on job creation before and after the Asian Financial Crisis. The relevant literature on the subject has been reviewed and a statistical analysis has been carried out. The findings show that one unit of FDI created more jobs before the Asian Financial Crisis but mainly due to the contribution of other factors such as government infrastructure spending which augmented financial inflows. After the crisis FDI effect on job creation decreased as an absolute value, but due to the decrease in other contributing factors a greater percentage of new employment became reliant on FDI as its source. Secondary findings include the effect that exchange rate changes have had on FDI levels and job creation, namely that they differ before and after the crisis. As well, infrastructure spending has becomes an ever more important factor in attracting FDI after the financial crisis.
Impact of Crisis Towards Foreign Direct Investment (FDI) in Eight Selected Asia Countries
2016
This paper is being titled as "Impact of Crisis Towards Foreign Direct Investment (FDI) in Eight Selected Asia Developing Countries.". Foreign Direct Investments (FDI) is an essential external financial source for every nation for which FDI will be used to promote or boost up a nation's economic growth. Therefore, the main objective of this paper is to determine the relationships between FDI inflows, GDP growth rate, exchange rate, level of infrastructure and also the presence of financial crisis in the context of developing countries. This study is crucial and vital to be conducted since the fluctuation of FDI inflows will directly affect the economic performance of a developing nation. Thus, a more in-depth analysis will be carried out to analyze the relationships. In a nutshell, this study will provide readers a better understanding on the behavior of economic changes towards the level of FDI inflows of developing nations.
Literature review of 100 empirical studies of Foreign Direct Investment: 1950-2015
International capital allocation influences has a social, political and economic impact on the trading countries. Thus, it has been investigated so as to determine the key factors of capital flows and their impact on the host country's economy. The present essay involves a literature review of 100 empirical papers focusing on capital movement and in particular in Foreign Direct Investment (FDI) inflows worldwide. The papers are discussed based on the statistical method applied, the sample chosen and the trends on the variables used. More recent empirical papers include larger samples of countries and the researchers don't tend to focus on case studies. Furthermore, it is argued that the empirical studies involve countries of every geographical region despite the fact that most of them focus on the largest recipients of F.D.I., that is to say the Asian and the Latin American countries.