What Is Foreign Direct Investment - Free Essay Example

Sample details Pages: 19 Words: 5689 Downloads: 6 Date added: 2017/06/26 Category Business Essay Type Narrative essay Did you like this example? The removal of cross-border restrictions on international capital flows and the trend toward an integrated world economy has been a substantial progress over recent two decades. Hence, it has increased the growth of foreign direct investment (FDI) activity. Madura and Fox (2007) define foreign direct investment (FDI) as the investment in real assets (such as land, buildings, or even existing plants) in foreign countries. They also find that multinational corporations (MNCs) commonly capitalize on foreign business opportunities by engaging in FDI. They engage in joint ventures with foreign firms, acquire foreign firms, and form new foreign subsidiaries. These types of FDI can generate high returns when managed properly. A substantial investment is required, and thus can increase the risk to capital. It may be difficult for multinational corporations to sell the foreign project when the investment does not perform well as expected. In order to maximize the corpor ations value, it is significant for MNCs to understand the potential return and risk of FDI and analyze the potential benefits and costs before making investment decisions. 2.1.2 Motives for FDI The reason why firms locate production overseas rather than exporting from the home country or licensing production in the host country, and the reason why firms seek to extend corporate control overseas by forming multinational corporations have been developed by many scholars. Kindleberger(1969) and Hymer(1976), emphasize various market imperfections in product, factor, and capital markets as the key motivating forces to accelerate FDI. Eun and Resnick (2004) explore some key factors that are important for corporations making decisions to invest overseas. These factors include trade barriers, imperfect labor market, intangible assets, vertical integration, product life cycle and shareholder diversification services. Madura and Fox (2007) indicate that MNCs engage in foreign direct investment widely because it can improve profitability and enhance shareholder wealth. In most cases, MNCs utilize FDI to boost revenues, reduce costs, or both. Revenue-related motives include attracting new source of demand, enter profitable markets, exploit monopolistic advantages, react to trade restrictions and diversify internationally. Cost-related motives involve full benefit from economies of scale, use foreign factors, use foreign raw materials, use foreign technology and react to exchange rate movements. 2.1.3 Benefits of FDI It seems unwise to conclude that both forms of geographic diversification are likely to be equally profitable or unprofitable. Errunza and Senbet (1981, 1984) find evidence to support a positive relation between excess firm value and the firms extent of international diversity by using multinational firms only. Focusing on international acquisitions, Doukas and Travlos (1988) and Doukas (1995) document that US bidders gain from industrial and i nternational diversification. Similarly, Morck and Yeung (1991, 2001) find a positive relation between international diversification and firm value. However, they show that industrial diversification and international diversification add or destroy value in the presence or absence of intangible assets. Their findings support the view that the synergistic benefits of international diversification stem from the information-based assets of the firm. Christophe and Pfeiffer (1998) and Click and Harrison (2000) find that multinational firms trade at a discount relative to domestic firms. More recently Denis, Denis and Yost (2002), using the Berger and Ofek (1995) excess value measure and aggregate data, show that global diversification reduces shareholder value by 18%, whereas industrial diversification results in 20% shareholder loss. In contrast, Bodnar, Tang and Weintrop (1999), relying on a similar valuation measure, find share-holder value to increase with global diversification. Doukas and Lang (2003) take firms which made foreign new plant announcements during the period 1980 1992 as a sample, regardless of the industrial structure of the firm, they interpret that unrelated foreign direct investments are associated with negative announcement effects and long-term performance decreases in subsequent years, whereas related investments are associated with positive short-term and long-term performance. Although their findings indicate that both specialized and diversified firms benefit from core-business-related rather than non-core-business-related foreign direct investments, the gains are larger for diversified firms. They conclude that geographic expansion of the firms core business itself is beneficial to shareholder value. In contrast, they find that geographic expansion of the firms peripheral (non-core) business harms firm value and performance. Hence the evidence indicates that the internalization theory is more consistent with the international expa nsion of the core rather than the non-core business of the firm. That is, the positive synergies from global diversification are rooted in the firms core competencies. Theories of foreign direct investment (FDI) agree on at least one major point: foreign firms mush have inherent advantages that allow them to overcome the higher costs of becoming a multinational (Hymer, 1976). These advantages may be tangible, such as an improved production process or a product innovation. They also may be intangible, such as brand names, better management structures or the technical knowledge of employees. Girma, Greenaway and Wakelin (2001) conclude that foreign firms do have higher productivity than domestic firms and they pay higher wages in the UK after their investigation. They do not find aggregate evidence of intra-industry spillovers. However, firms with low productivity relate to the sector average, in low-skill low foreign competition sectors gain less from foreign firms. FDI brin gs two main benefits to the host country. First, it introduces new production facilities into the domestic economy directly, or may rescue failing firms in the case of acquisition, raising overall output, employment and exports. Second, domestic governments hope that foreign firms will be unable to internalise their advantages fully, and local firms can benefit through spillover. 2.1.4 Effects of FDI Borensztein, Gregorio and Lee (1998) test the effect of foreign direct investment (FDI) on economic growth in a cross-country regression framework by utilizing data on FDI flows from industrial countries to 69 developing countries over the last two decades. The results suggest that FDI is significant for transfer technology, and contributes more to growth than domestic investment. Moreover, they find that the contribution of FDI to economic growth is improved by its interaction with the level of human capital in the host country. However, the empirical results imply that FDI is mo re productive than domestic investment only when the host country has a minimum threshold stock of human capital. Thus, FDI contributes to economic growth only when a sufficient absorptive capability of the advanced technologies is available in the host economy. Investigating the effect of FDI on domestic investment, they find that the inflow of foreign capital crowds in domestic investment rather than crowds out. FDI support the expansion of domestic firms by complementarity in production or by increasing productivity through the spillover of advanced technology. A one-dollar increase in the net inflow of FDI is associated with an increase in total investment in the host economy of more than one dollar, but do not appear to be very robust. Thus, it appears that the main channel through which FDI contributes to economic growth is by stimulating technological progress, rather than by increasing total capital accumulation in the host economy. Markusen and Venables (1999) develop s an analytical framework to assess the effects how an FDI project affect local firms in the same industry. There are two forces for the effect of entry of a multinational firm on the domestic industry. One is a competition effect, under which multinationals displace domestic final-goods producers, and the other is a linkage effect back to intermediate-goods producers, creating complementarities which could benefit domestic final-goods producers. They explore the determinants of the relative strengths of these effects. In circumstances of initial equilibrium with no local production, multinational entry can push the economy over to an equilibrium with local production in both the intermediate and final-goods industries, with a resulting welfare improvement. They then pay attention to endogenise the entry decision of multinational firms. It may now also be the case that multinationals provide the initial impetus for industrialisation, but the developed local industry creates suffi ciently intense competition to eventually drive the multinationals out of the market. Hobday (1995) finds initial multinational investments in developing East Asia created backward linkage effects to local suppliers in a large number of situations. There are some examples such as computer keyboards, personal computers, sewing machines, athletic shoes, and bicycles in Taiwan. 2.2 Cost of capital and capital structure Many major firms through the world have begun to internationalize their capital structure by raising funds from foreign as well as domestic sources. As a result, these corporations become multinational not only in the scope of their business activities but also in their capital structure. This trend reflects not only a conscious effort on the part of firms to lower the cost of capital by international sourcing of funds but also the ongoing liberalization and deregulation of international financial markets. If international financial markets were completely integ rated, it would not matter whether firms raised capital from domestic or foreign sources because the cost of capital would be equalized across countries. On the other hand, some markets are less than fully integrated, firms may be able to create value for their shareholders by issuing securities in foreign as well as domestic markets. Cross-listing of a firms shares on foreign stock exchanges is one way a firm operating in a segmented capital market can lessen the negative effects of segmentation and also internationalize the firms capital structure. For example, IBM, Sony, and British Petroleum are simultaneously listed and traded on the New York, London, and Tokyo stock exchanges. By internationalizing its corporate ownership structure, a firm can generally increase its shares price and lower its cost of capital. 2.2.1 Definition of cost of capital Eun and Resnick define the cost of capital as the minimum rate of return an investment project must generate in order to pay its financing costs. If the return on an investment project is equal to the cost of capital, under taking the project will leave the firms value unaffected. When a firm identifies and undertakes an investment project that generates a return exceeding its cost of capital, the firms value will increase. It is significant for a value-maximizing firm to try to lower its cost of capital. Madura and Fox (2007) explain that a firms weighted average cost of capital (referred to as Kc ) can be measured as: Kc = [D/(D+E )] * Kd * ( 1-t ) + [E / (D+E)] * Ke Where: D = market value of firms debt Kd = the before-tax cost of its debt t = the corporate tax rate E = the firms equity at market value Ke = the cost of financing with equity The ratios reflect the percentage of capital represented by debt and equity, respectively. In total the cost f capital, Kc is the average cost of all providers of finance to the firms. A multinational company finances its operations by using a mixture of fixed interest borrowing and equity financing that can minimize the overall cost of capital (the weighted average of its interest rate and dividend payment). By minimizing the cost of capital used to finance a given size and risk of operations, financial managers can maximize the value of the company and therefore maximize shareholder wealth. According to the size of firm, international diversification, exposure to exchange rate change, access to international capital markets and exposure to country risk, the cost of capital for MNCs may be different from that for domestic firms. 2.2.2 Costs of capital across countries Madura and Fox (2007) interpret that an understanding to why the cost of capital can vary among countries is relevant for three reasons. First, it can explain why MNCs based in some countries may have a competitive advantage over others. Just as technology and resources differ across countries, so does the cost of capital. MNCs based in some coun tries will have a larger set of feasible (positive net present value) projects because their cost of capital is lower; hence these MNCs can more easily increase their world market share. MNCs operating in countries with a high cost of capital will be forced to decline projects. Second, MNCs may be able to adjust their international operations and sources of funds to capitalize on differences in the cost of capital among countries. Third, differences in the costs of each capital component ( debt and equity ) can help explain why MNCs based in some countries tend to use a more debt-intensive capital structure than MNCs base elsewhere. The cost of debt to a firm is primarily determined by the prevailing risk-free interest rate in the currency borrowed and the risk premium required by creditors. The cost of debt for firms is higher in some countries than in others because the corresponding risk-free rate is higher at a specific point in time or because the risk premium is higher. Cou ntries differences in the cost of debt include differences in the risk-free rate, differences in the risk premium and comparative costs of debt across countries. A firms cost of equity represents an opportunity cost: what shareholders could earn on investments with similar risk if the equity funds were distributed to them. This return on equity can be measured as a risk-free interest rate that could have been earned by shareholders, plus a premium to reflect the risk of the firm. The risk premium and hence the cost of equity will vary according to different economic environments. The costs of debt and equity can be combined to derive an overall cost of capital. The relative proportions of debt and equity used by firms in each country must be applied as weights to reasonably estimate this cost of capital. 2.2.3 MNCs capital structure decision Bancel and Mittoo (2004) survey on the cross-country comparisons of managerial views on determinants of capital structure in a samp le of 16 European countries: Austria, Belgium, Greece, Denmark, Finland, Ireland, Italy, France, Germany, Netherlands, Norway, Portugal, Spain, Switzerland, Sweden, and the UK. They show that factors related to debt are influenced more, and those related to equity are influenced less, by the countrys institutional structure, especially the quality of its legal system. They find that financial flexibility and earnings per share dilution are primary concerns of managers in issuing debt and common stock, respectively. Managers also value hedging considerations and use windows of opportunity when raising capital. This evidence strengthens arguments of La Porta et al. (1997, 1998) that the availability of external financing in a country is influenced primarily by its legal environment. Since agency costs of debt are likely to be higher in countries with lower quality of legal systems, this evidence is also consistent with theories of capital structure such as agency theory that assign a central role to debt contracts and bankruptcy law (Harris and Raviv, 1991). They find that although a countrys legal environment is an important determinant of debt policy, but it plays a minimal role in common stock policy. They find that firms financing policies are influenced by both their institutional environment and their international operations. They also show that firms can adopt strategies to mitigate the negative effects of the quality of the legal environment in their home country. For instance, firms in civil-law countries have significantly higher concerns for maintaining target debt-to-equity ratios and matching maturity than do their peers in the common-law countries. Further, they find that firms operating internationally have significantly different views than do their peers in several ways. For example, firms that have issued foreign debt or equity in the sample during the last ten years are more concerned about credit ratings. Firm-specific variables that are commonly used in the capital structure literature to explain leverage also explain cross-country differences in managerial rankings of several factors. For example, large firms are less concerned about bankruptcy costs, and high growth firms consider common stock as the cheapest source of funds and use windows of opportunity to issue common stock. These results support the arguement by Rajan and Zingales (1995, 2003), that firms capital structures are the result of a complex interaction of several institutional features as well as firm characteristics in the home country. Their results support that most firms determine their optimal capital structure by trading off factors such as tax advantage of debt, bankruptcy costs, agency costs, and accessibility to external financing. They confirm the conclusions of Titman (2002): Corporate treasurers do occasionally think about the kind of trade-offs between tax savings and financial distress costs that we teach in our corporate finance c lasses. However, since this trade-off does not change much over time, the balancing of the costs and benefits of debt financing that they emphasize much is not MNCs major concern. They spend much more time thinking about changes in market conditions and the implications of these changes on how firms should be financed. Lee and Kwok (1988) examine the impact of international environmental factors on some firm-related capital structure determinants which in turn affect the MNCs overall capital structure. They consider international environmental variables of political risk, international market imperfections, complexity of operations, opportunities for international diversification, foreign exchange risk and local factors of host countries, and test agency costs and bankruptcy costs. They find that MNCs tend to have higher agency costs of debt according to Myers definition than DCs. This finding remained unchanged even when size and industry effects were controlled. Though MNCs app eared to have lower bankruptcy costs than DCs, the difference largely disappeared when the size effect was controlled. Quite contrary to the conventional wisdom, the empirical findings showed that MNCs tended to be less leveraged than DCs. This finding remained even when the size effect was controlled. However, when companies were separated under different industry groups, the results varied significantly. Burgman (1996) directly estimate the effect of foreign exchange risk and political risk on the capital structure of MNCs. Using the foreign tax ratio to classify firms as either MNCs or DCs and controlling for industry and size effects, Burgman finds that MNCs have lower debt ratios and higher agency costs than DCs. Furthermore, international diversification does not appear to lower earnings volatility. To estimate the sensitivity of a firm to foreign exchange risk, Burgman conducts a regression analysis of the stock returns of each sample firm on the returns of an index of U.S . stocks and on the U.S.$:SDR returns. His political risk measure is based on the following ratio: number of low political risk countries to the total number of countries in which the firm operates. Low political risk countries are the top 20 in the country risk rankings provided by Euromoney in 1989. The results of a regression analysis for his sample of MNCs suggest that the debt ratios of these companies are positively related to both risks. Burgman concludes that this evidence is consistent with the hypothesis that MNCs use debt policy as a tool to hedge foreign exchange risk and political risk. Chen et al. (1997) conducted regression analyses to investigate the effect of international activities (as measured by foreign pre-tax income) on capital structure. They report that even after controlling for firm size, agency costs of debt, bankruptcy costs and profitability, the long-term debt ratios of MNCs are lower than those of DCs. However, within their sample of MNCs, debt rat ios increase with the level of international activities. 2.2.4 Segmented capital market A capital market for asset claims is integrated when the opportunity set of investments available to each and every investor is the universe of all possible asset claims. In contrast, a capital market is segmented when certain groups of investors limit their investments to a subset of the universe of all possible asset claims. Such market segmentation can occur because of ignorance about the universe of possible asset claims, or because of transactions costs (brokerage costs, taxes, or information acquisition costs), or because of legal impediments. From an international perspective, market segmentation typically occurs along national borders, a condition wherein investors in each country acquire only domestic asset claims. Grubel, Levy and Sarnat, and Lessard employ a mean-variance portfolio theoretic framework, have stressed the benefits of diversifying investments across national bord ers, namely the pooling of risks that results from investing in projects that are less than perfectly correlated. Subrahmanyam points out that when segmented capital markets are integrated, in addition to the diversification effect (always positive), there is a wealth effect (possibly negative) which arises out of changes in the macro-parameters of the risk-return relationship. For the special cases of quadratic, exponential, and logarithmic utility functions, it can be shown that international capital market integration is Pareto-optimal, that is, the welfare of individuals in the integrated economies will not decline, and will generally improve. The positive effect of an expansion in the opportunity set offsets any negative wealth effect. The market reformed and liberalized in developed economies in the 1970s and emerging economies during the second half of the 1980s led to the removal of many barriers. The deregulation and the development of local equity markets allowed the po ssibility of foreign portfolio investments (FPIs). Overall, FPIs would provide a new source of capital and internationalize the domestic capital markets. Subsequent improvements in risk sharing and risk matching would cause the cost of capital to fall. Errunza and Miller (2000 ) use a sample of 126 firms from 32 countries, document a significant decline of 42% in the cost of capital. In addition, they show the decline is driven by the ability of U.S. investors to span the foreign security prior to cross-listing. The findings support the hypothesis that financial market liberalizations have significant economic benefits. 2.2.5 Interaction between subsidiary and parent financing decisions In segmented markets the parent and its subsidiaries will generally have different valuation objectives and investment-acceptance criteria. Under some conditions these depend on the international financing mix. Decentralization can be optimal in the sense of global maximization, provided that t he parent is unrealistically free, ex-ante, to optimize its percentage ownership in the subsidiaries at the beginning of each planning period. In the case of a two-country firm, the subsidiaries maximands are independent of the parents. But when the parents ownership position is predetermined at a fixed level, as it is normally, the situation is radically different. Market values cannot then be maximized independently and Pareto optimization is required. Michaels (1974) main result is that, unless agreement can be reached on a compensation principle, the joint ventures cost of capital will be indeterminate. In such circumstances optimal financial planning for the MNC as a whole may be impossible. Concluding remarks draw attention to the attendant possibility that the MNC in this case may be unstable and/or inefficient. 2.2.6 The MNCs capital structure decision An MNCs capital structure decision involves the choice of debt versus equity financing within all of its subsidiaries. Thus, its overall capital structure is essentially a combination of all of its subsidiaries capital structures. MNCs recognize the tradeoff between using debt and using equity for financing their operations. The advantages of using debt as opposed to equity vary with corporate characteristics specific to each MNC and specific to the countries where the MNC has established subsidiaries. Madera and Fox (2007) indicate some common firm-specific characteristics that affect the Macs capital structure such as stability of Macs cash flows, Macs credit risk, Macs access to retained earnings, Macs guarantees on debt and Macs agency problems. They also point the unique host country characteristics can influence the MNCs choice of debt versus equity financing and therefore influence the MNCs capital structure. These characteristics include stock restrictions in host countries, interest rates in hose countries, strength of host country currencies, country risk in host countries and tax laws in host countries. 2.3 Risk analysis 2.3.1 Political risk With operations under the jurisdiction of a foreign government the firm is also exposed to political risk, therefore it must estimate the potential costs it will face due to unstable governments, regime change and changes in policies. Political risk may be defined as a particular exposure to risk which depends on the actions of a government, and its assessment or analysis for a MNC is a decision-making tool for investing in foreign countries. Over recent decades, there has been a significant increase in political risk for MNCs. This is true not only for an MNCs operations in developing countries, but also for those in developed countries. Governments have felt the need to respond to various pressure groups aimed at curbing the power of MNCs. For example, oil companies may face unfavourable legislation designed to pay for the damage to environment. Developing countries may have to respond to populist sentiments or worsening economic circumstances by seeking to renege on contracts signed by previous regimes. Another risk area which has grown in recent years has been the strength of fundamentalist religious groups in a number of economically important regions. Shapiro (1999) and Buckley, 2000) argue that government intervention in the economy increases the likelihood of political risk for the MNCs. Proponents of free markets strongly support this view, arguing that government intervention creates a number of inefficiencies in the markets that discourage competition, justify the privilege of state-controlled enterprises, promote unnecessary bureaucracy, and overall stifle initiative. Clark and Marois(1996) and Wilkin (2000) categorise negative political risks as macro and micro risks. Macro political risks are those which affect MNCs in general, whereas micro political risks are those which relate to specific firms in specific countries. Shapiro identifies them as: expropriation; currency an d trade controls; changes in tax and labour laws; regulatory restrictions; and requirements for additional local production( 1996:747). Simons framework includes wider societal issues such as public opinion, alliance shifts, revolutions and coups (quoted in Demirag and Goddard, 1994). Expropriation is generally regarded as the most obvious and extreme form of political risk. The realities of the current global economic climate mean that many countries may not resort to such drastic measures, due to the very unfavourable situation that such an action may create for them in the long term. This could be in the form of international economic isolation and cessation of support from the International Monetary Fund and the World Bank. This support is vital for continued economic progress in developing countries, and any cessation of it may mean an even tougher economic environment for these countries. Before commencing operations an MNC should undertake a dispassionate and careful an alysis of the political risk of operating in the foreign country concerned. Operations in developing countries may require a more thorough analysis of the costs versus benefits, and a large degree of uncertainty may always be present in starting operations in a developing country. This should be weighed against the perceived benefits and calculated returns on investment. It is important for the MNC to take a calculated and educated view of the situation. There is no commercial activity without risk, and a degree of risk will therefore have to be accepted. Some of the important aspects that need to be looked at are: political stability, or degree of acceptable instability; economic factors; savings, development and social stability; government budget deficits; and transparency and openness of the economy. It must also be recognised that recent developments in terrorism risk are bringing a new dimension to political risks. While terrorism in the past may have been identifiable as a county risk, such as the IRA in the UK, Abu Nidal in Israel and the Shining Path in Peru. There is the growth of terrorist groups in the 21st century who are not associated with a specific nation-state or narrow geographical region. The actions of such groups may disrupt a business across a range of activities and locations, rather than simply disrupting operations in a specific country. The most obvious answer when faced with political risk would perhaps be to avoid it completely by deciding not to do business in a particular country, but this has to be balanced against the loss of an opportunity to make a profit, and the more global nature of certain political risks. Given the risks inherent in business generally, it would normally only be the most extreme situations that require avoidance. The decision would most probably be made, on commercial grounds, to accept a degree of political risk and attempt to manage such risk effectively. Political risk, like other risks, may be m anaged by diversification across various territories. Henisz (2000) shows that multinationals face an increasing threat of expropriation if political hazard in the host country increases. However, the degree of risks depends on the strategic behaviour of the multinational, which may partner with host-country firms that have a comparative advantage in interactions with the host-country government. Harms (2002) estimated the impact of financial risk on equity investment flows which includes the sum of FDI and portfolio investment to developing countries. Using a panel data set of 55 developing countries and the period 1987 to 1995, he find that lower financial risk is associated with an increase in FDI and portfolio investment. On the other hand, Egger and Winner (2005), utilize a sample of 73 countries over the period 1995 to 1999 and find a positive linkage between corruption and FDI. In the presence of excessive regulation and other administrative controls, they propose that cor ruption may act as a helping hand to encourage FDI inflows. Recently, several studies have analysed the relationship between fundamental democratic rights and FDI. Using different econometric techniques and periods, Harms and Ursprung (2002), Jensen (2003), and Busse (2004) interpret that multinational corporations are more likely to be attracted where there is democracy. On the other hand, Li and Resnick (2003) argue that competing causal linkages are at work. They find that democratic rights lead to improved property rights protection, which increases foreign investment. Apart from this indirect impact on FDI, increases in democracy may reduce FDI. These studies use pooled time-series analysis, but not all of them account for possible endogeneity of the independent variables while some often focus on very specific indicators such as democratic rights, omitting a broader range of policy-related variables. Busse and Hefeker (2007) explore the linkages among political risk, ins titutions, and foreign direct investment inflows and show that government stability, internal and external conflict, corruption and ethnic tensions, law and order, democratic accountability of government, and quality of bureaucracy are highly significant determinants of foreign investment inflows. 2.3.2 Exchange rate risk In foreign direct investment (FDI), most firms face exchange rate risk because the exchange rate between the home and host currencies might change in the future. When transactions are contractually finalized (transactions exposure), the firms value might change because of the sensitive exchange rate movements (economic exposure). The importance of exchange-rate variability for domestic and international investment flows has been argued quite a lot. In industrialized economies, the presumed effects of exchange-rate variability have influenced the choice of international monetary regimes. The Smithsonian Agreement was discussed in the early 1970s and again a t the time of the Plaza Accord during the mid-1980s. In the early 1990s, the negative implication of variable exchange rates was a theme for designing the Exchange Rate Mechanism (ERM) operable over currencies in the European Monetary System (EMS). The currency crises within the ERM in September 1992 and Spring 1993 refocused attention on the rationale for limiting short-term nominal exchange rate movements and on the validity of arguments that exchange rate variability is costly and dampens real economic activity. Igawa (1983), Cushman (1985, 1988) and Goldberg and Kolstad (1995) examine bilateral FDI flows between the U.S. and a few of developed countries (U.K., France, Germany, Canada and Japan), they find a positive relationship between exchange rate risk and FDI. On the other hand, Kelly and Philippatos (1982) argue that the investments appeal less when the exchange rate risk is greater. Clare (1992, 1998), Benassy-Quere, Fontagne, and Lahreche-Revil (2001) and Brzozowski (2 006) focus on cross-country studies and all find a negative relationship between exchange rate risk and FDI. Benassy-Quere, Fontagne, and Lahreche-Revils (2001) study covers FDI flows from 17 OECD nations to 42 developing countries, finding a negative response to exchange rate risk. Brzozowskis (2006) study covers FDI flows to 32 transition and emerging countries, and shows a relationship not as strong as expected, is still negative. Clares (1992) study covers the FDI flow from the U.S. to 14 developed and 15 developing countries, and finds a strong negative relationship for each set of countries as well as across the entire spectrum of countries. Clark, Hooper and Kohlhagen, Gotur, Cushman (1983, 1988), De Grauwe, Maskus, and others focus on tudies of the effects of exchange rate risk on trade and find that exchange rate risk reduces trade. However, earlier results (Hooper and Kohlhagen) lend little support to this hypothesis; although Cushman (1988) find significant adverse eff ects of exchange rate risk on U.S. trade flows. Pick (1990) analyzes the effects of exchange rate risk on U.S. agricultural exports to ten different countries and estimate a model which incorporates exchange rate risk. but it also shows that exchange rate risk is not always important. His results suggest that the exchange rate risk was not significant in the seven developed markets, but significant to determine U.S. agricultural exports. Anderson and Garcia ( 1989) examine the effects of exchange rate uncertainty on bilateral soybean trade flows and finds that imports for Japan, France, and Spain are sensitive to short-term variations in nominal bilateral exchange rates. 3. Methodology 3.1 Reseach methods and data (not be finished) Here, this dissertation use the second data gathered from the companies and research based on other scholars research. 3.2 The International Capital Asset Pricing Model(ICAPM) Madura and Fox (2007) indicate that the International Capital As set Prcing Model (ICAPM) can be regarded as more formal treatment of the cost of capital elements than mentioned before. This model is an international extension of the Capital Asset Pricing Model (CAPM). The CAPM addresses a single currency area and single financial market where there are no restrictions on financial transactions. The ICAPM extends this analysis to multiple currency areas and multiple financial markets. Both these two models seek to answer the question what discount rate should be applied to the future cash flows of a particular project. Kj = Rf + ÃÆ'Ã… ½Ãƒâ€šÃ‚ ²j ( Rm Rf ) Where: Rf = risk free rate of return Rm = market return ÃÆ'Ã… ½Ãƒ ¢Ã¢â€š ¬Ã¢â€ž ¢ = beta of a particular share or a project The application of the CAPM model and the ICAPM model presents considerable practical problems for an MNC. The company first has to find a like project of a similar risk class to identify an appropriate beta. Highly correlated measures of return can produ ce very different betas. There is a problem of meaning. Why a beta is particularly high or low or why it changes is not easy to explain. Selecting the appropriate beta may well not be easy. A final critique is that the model is not complete. The application of the ICAPM or any discount cash flow model does not account for the role of real options in investments. Don’t waste time! Our writers will create an original "What Is Foreign Direct Investment" essay for you Create order

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The article talks about how important individualizedRead MoreGeneralized Anxiety Disorder1142 Words   |  5 PagesGeneralized anxiety disorder (GAD) is a disorder of shared self-reported symptoms. It goes with tension, uncontrollable worrying, sometimes muscle pain, trouble sleeping, and irritability that all together impair work ability, relations, and leisure activities. It is a common condition and there are psychological and pharmacological treatment options are available for anxiety disorders but not all patients respond to the same treatment as others. Finding a good treatment can take many months or sometimesRead MoreBehavioral Medicine : Cognitive Behavior And Medication1079 Words   |  5 PagesCogni tive Behavior and Medication Studies have been done on the cognitive behavior and medication. Some studies looked at the behavior with bipolar disorder and the medication that they take for the (Micheal Bauer, Tasha Glenn, Paul Grof, Natalie L Rasgon, Wendy Marsh, Kemal Sagduyu, Martin Alda, Ute Lewitzka, Rita Schmid, Perter C Whybrow 2009). Some studies focus on depression treatment and the serotonin reuptake (Benedetto Vitello 2009), (Sonya S. Descheˆnes †¢ Michel J. Dugas 2012) (Bjo ¨ rn Paxling

Impact of New Technology Essay Sample free essay sample

Today. engineering possesses a important consequence in the design and selling procedure of consumer merchandises. particularly electronics. As new innovations discovered. electronic merchandises have besides grown in maps and forms. Recognized or non. these new innovations by and large led the manner to new tendencies and cravings within the society of consumers. The alteration from one technological tendency to another is a procedure affecting assorted technological every bit good as cultural factors. In this paper. I will seek to place some of them utilizing the latest tendency of portable sound participants. This paper will lucubrate the history of audio participants. how the ‘turn’ to portable sound participants occurred and what factors were involved within them. The first sound participants were immense valve-based devices. It was both big and heavy. Automatically the lone manner we can listen to music is by being restricted to our life suites. However. sometime in the 60’s. the transistor was discovered. Shortly after. people can listen to the wireless without being ‘tied down’ within their suites. The really fist portable sound participant was really the 8 path participant. It has considerable success. but received heavy critics every bit good because of its majority and incommodiousness. It could merely play 8 path tapes. therefore. most tapes must be separated into two or sometimes three parts ( ‘Portable Music Player’ . 2006 ) . The nest coevals of portable sound participant was the cassette participant. In July 1979. Sony released the first Walkman. the Sony TPS-LS2. It was a little device powered by a 4 AA battery which allow people to listen to cassettes through earphones. The public reaction was unbelievable. By 1982. the new tendency has set a record on compact cassettes gross revenues figure and the Walkman itself ( ‘Portable Music Player’ . 2006 ) . After the Walkman. the following coevals of tendency in portable sound participant was the Discman or the CD-player. Many believed that the death of Walkman was the work of Sony itself when the company introduced the D-50. a portable sound participant that can play music directly from a compact phonograph record. For rather some clip. the Cadmium participant was the dominant portable music participant. Afterwards. mini phonograph record participants. brassy memory participants and audio participants with an internal memory threatened to replace the Cadmium participants. nevertheless. the Cadmium participant survive because it now reads mp3 CD’s ( ‘Portable Music Player’ . 2006 ) . The last coevals of portable sound participants is the Digital Audio Player ( DAP ) . The first DAP was criticized for several issues. First. the MP3 files by and large do no hold better sound quality. Peoples besides found it troublesome in reassigning files. despite utilizing transportation plans. The issue was so solved as new versions of iTunes became simpler to cover with. Today. the DAP consist of three devices: ( ‘Portable Music Player’ . 2006 ) The alteration from one engineering of digital participant to another was non every bit simple as it seems. As mentioned in the debut. it involves assorted factors whether they are proficient or cultural in nature. In 2004. the market value of portable sound participants in United Kingdom entirely was valued at some ? 473. 6 million. This was a 15 % addition since 2000. It was besides forecasted that the market for all portable digital participants will make a 37 % compound one-year growing rate from 2002 to 2007. During that period. entire portable unit cargos are expected to mount from 6. 8 million units to 36 million units. Many indicated that the rise was due to the increasing popularity of digital music participants. Some of those factors act uponing the development of the tendency will be elaborated in the undermentioned bomber chapters ( Bell. 2003 ) . 3. 1 The function of Marketing Sellers frequently stated that what they do is following bing tendency. But in fact. we frequently see that it is the sellers that shaped the tendencies as they please. Today. tendency is really much influenced by what we see in Television. newspapers and hoardings. by what we hear from our friends and households. etc. Those are all the work of selling experts. Long have they discovered that tendency are ‘made’ and non ‘born’ . The debut of Walkman for illustration. requires intensive promotional activities from manufacturers. In order to advance the Walkman. Sony. needed a powerful ad visible radiation striking publicity run. Directors of the company have had hard times converting people of the value of the bran-new merchandise. In Japan. creative person. Television and film stars received free samples. This was considered a good thought because fans have a inclination of following behaviours of their graven images. Soon. the gross revenues records went sky high during the first hebdomad of its release in Japan ( Bartlett. 2001 ) . Sony applied different selling schemes for different markets. In the United States. ‘sore shoulder. no more’ was a portion of a widespread selling run of the Walkman. This is due to the old tendency of American youth transporting big boombox on their shoulders. The first hebdomad gross revenues figure in America was recorded 16 billion units ( Bartlett. 2001 ) . 3. 2 Technical and Price Competition Beside marketing facets. many considered that the tendency toward portable sound participants is besides influenced by the proficient considerations. Consumers prefer appliances with more maps and characteristics. The rise of the portable sound participants mentioned antecedently was besides the consequence of higher capacity storage. increased participant options. add-on of real-time encryption. As more companies enter the competitory market. audiophiles can please in a enormous choice of options. sizes. forms and colourss. Different companies offer different characteristics to heighten their competitory advantages. Some offers hard drives that shop the music internally. while other offers interchangeable storage media. It is the consumers who so choose characteristics harmonizing to their personal demands. Considerations like. size versus storage infinite. compact or full size earphones and which sounds the best are powerful factors that influence purchase behaviours ( Bell. 2003 ) . Another dominant factor is monetary value. Since the first designs of portable sound participants. companies have been aiming the young person market in their selling run. This is one ground why cheaper monetary values could significantly heighten gross revenues figure in portable sound participants. More cheap semiconducting material constituents allow manufacturers of portable sound participants to diminish the cost of the merchandises. Even the larger capacity of hard-disk based portables is now sing diminishing monetary values ( Bell. 2003 ) . Both the monetary value decreases and a larger assortment of HDD-based devices along with consumers’ involvement in utilizing the devices to hive away picture and even informations will lend significantly to the growing of the portable audio player’s market. From these factors. every bit good we can place which merchandise will be the following large tendency among consumers ( Bell. 2003 ) . 3. 3 Technological/Cultural Mass Adoption on Portable Audio Player 3. 3. 1 Technological Tendencies of Portable Audio Players Technological tendencies are one of the most powerful phenomena that influence the way of an economic system. The phenomena would impact societies from non merely economic position but besides from societal. legal. and other related positions. It is interesting to see there are many appliances that entertain and help us to execute several activities in much easier ways. In 80’s we experience the new epoch in basking music through the innovation of Walkman. a simple. visible radiation and hence portable appliance. Since so we witness that portability becomes issue in developing new merchandises. ensuing in appliances like Discman. Game Watch. Wristwatch. and Sony’s PlayStation Portable ( PSP ) with internet entree embedded on it. to call a few. Therefore. the technological tendencies of electronic appliances are portability. Harmonizing to talk portables ( 2006 ) . portability becomes keywords to win in this fast-moving concern. About. com in his article reveals that Nintendo sold more than 21 million DS units since its debut in November 2004. The state of affairs besides occurs at other portable media like pocket Personal computer that enable users to take a note. browse cyberspace. and listen to music as if they use desktop computing machines at place. 3. 3. 2 Cultural Tendencies of Portable Audio Players Sony’ Walkman. which was popular several decennaries ago. was one illustration of how portable appliances become sidesplitting characteristic for electronic media. However. the success of electronic media does non simply depend on the advanced engineering that a appliance airss but besides cultural consideration. Take for illustration is the narrative behind the innovation of Walkman. a hand-held musical device. a few decennaries ago. At that clip. in 1979. research section suggested that handheld music appliances are no manner to do net income for Sony since harmonizing to quantitative research they conduct the collected information from samples showed that there are no people are likely to bask music while walking or running. This state of affairs shows that over trusting on quantitative informations might ensue in misjudge and chance loss to bring forth a salable merchandise like Walkman. In instance of Sony. although the quantitative analysis shows Walkman is non salable. nevertheless. clever foresight and vision of Sony Founder and Chief Advisor. Masaru Ibuka and Sony Founder and Honorary Chairman Akio Morita have promoted the production of the Walkman and flooded the market with it. The determination was made since he saw that many African American people bring music participants anyplace and he believed that portability becomes killing characteristic of future electronic media. It turn out. as we know. that handheld devices like Walkman. Discman and many others are salable in the yesteryear. in present. and in the hereafter. 3. 3. 2 iPod Craze One thing digital engineering favours computing machine industry is that any concern that employs computing machine hardware could be considered as parts of computing machine industry. The issue of Napster’s expiration due to illegal action had unfastened new chance for legal music download industry although late we can still download military policeman. 3-based music through P2P ( peer-to-peer ) method of file sharing. Refering the issue. Apple Computer creates new scheme by developing new killing appliances when the company invents and massively produces iPod. a digital music participant that supports legal download for 99 cents per path ( Figure 1 ) . This scheme highlights the Apple’s purpose to govern out computer-related industry. Figure 1 iPod Nano Beginning: World Wide Web. ipoditude. com The obvious success of iPod has put Apple Computer as a serious rival to Sony and Microsoft. In order to stay in the computing machine industry. Apple get their loyal client by making merchandises that have great characteristics. such as executing good design. user-friendliness. smart selling. and cagey publicity. The characteristics include individualized web logs. iTunes. and many others ( Figure 2 ) . The debut of iPod is widely accepted by consumers as by June 2005. Fortune Magazine stated that Apple has sold non less than 15 million iPods. In September 2005. the 5th coevals iPods are able to play picture every bit good as music. Some called this new design a picture iPod ( iPod. 2005 ) . Figure 2 Features of iPod that better relationship with clients. Beginning: World Wide Web. apple. com 3. 3. 2. 1 iPod and Personalized Blos Blog is one illustration of how engineering helps a individual to portion thoughts in the Internet at no costs. It is precisely similar to compose on a column in a magazine or newspaper where people can besides portion thoughts on peculiar topics. By definition. the definition of a web log or Web Log is a â€Å"Web page that serves as a publically accessible personal diary for an individual† ( â€Å"Blog† ) . This web page is typically updated day-to-day and reflects the personality of the writer. A web log is slightly similar to a public diary maintaining that grows up to be an of import point in back uping a company’s online concern since it is more effectual than on-line advertisement or selling. For cases. Tom Wark. proprietor of a wine industry public dealingss house. Wark Communications. has a web log that display his remarks refering assorted issues on wine-related industry ( Richmond ) . He believe that web log supply his company a great benefit since the figure of traffic into his company’s web site becomes two crease. However. the usage of a web log will non straight lead to more money since people or readers do non pay for seeing a web log. However. the proprietor of a company who use a web log might utilize a selling scheme to do a web log going a tool for enticing consumers to purchase merchandises or services the proprietor has. Therefore. the proprietor has chance to make a monolithic clients database. Refering the potency of a web log. Apple besides equips their iPod with the capableness to blogging. IPoditude. com becomes the Web’s Prime Minister iPod web log that enables users to run down newsworthy in the universe of iPod and reaches a targeted audience. In add-on. iPoditude. com readers are those who hungry for updated intelligence. info sharing. and passion. Presently. iPoditude links many site such as Gizmodo. iPodlounge. Planet iPod ( featured provender ) and many others. Figure 3 Official Apple Website that enriched with iPod’s characteristics 3. 3. 2. 2 iPod and Challenge in Musical Industry The innovation of iPod earnestly challenge the traditional Cadmiums and VCDs since now client can download music both legal and illegal since the format of digital music is now available in many signifiers and do people easy to download them. In add-on. the being of iPod besides gives challenges to music industry since the individualized choice of vocals may set album in the weak place. This is because as music lovers. we prefer to choose some pieces of vocals from different vocalists and set them in the same booklet since we might non like all the vocals in one album from a peculiar vocalist. Therefore. the being of iPod becomes serious challenges for musical industry and helps consumers to bask music much better since consumers who express their thoughts in World Wide Web. wired. com feel they are ill of high album monetary values and limited handiness. Meanwhile. the iPod and its characteristic. iTunes. enable consumers to download peculiar vocals and portion it with their friends at no costs. Bibliography ‘Apple’s Strategy’ . 2004. Retrieved August 16. 2006 from hypertext transfer protocol: //www. it-analysis. com/article. php? articleid=12794 Bartlett. Michael. 2001. ‘CES: overplus of Portable Audio Player- Industry Trend or Event’ . Newsbytes News Network Bell. Ian. 2003. ‘The market for digital sound participants should stay robust over the following five old ages. driven largely by gross revenues of hard-disk drive-based portables and combination CD/MP3 players’ . Digital Trends [ on-line ] . Retrieved November 20. 2006 Available at hypertext transfer protocol: //news. digitaltrends. com/article235. hypertext markup language iPoditude. 2006. ‘Advertise with iPoditude. com’ . Retrieved November 27. 2006 from hypertext transfer protocol: //www. ipoditude. com/ads. php ‘Portable Music Player’ [ online ] . 2006. Retrieved November 20. 2006 available at hypertext transfer protocol: //www. kuleuven. be/iccp/iccp03/history. htm Richmond. Riva. ‘Blogs Keep Internet Customers Coming Back’ .Wall Street Journal

Who is a True Christian Essay Example For Students

Who is a True Christian? Essay It appears that Jane has had a strong belief in God, but sheseems to have a more wholesome and wholehearted beliefthan some other characters in the novel. In the beginning ofthe novel young Jane is painfully rejected by her aunt, aswell as her son and daughter.She is unable to alter the dailypattern of abuse and neglect. This makes it obvious that shedid not live as a member of a truly Christian family, but shewas mature enough to develop her own beliefs throughdaily prayers and biblical readings. Further in the story, she meets Mr. Brocklehurst for thefirst time and interviews Jane about sin, hell and the Bible. At one point in the conversation he asks her if she knowsany psalms, she replies that Psalms are not interesting(Bronte,490). This proves to Mr. Brocklehurst that she hasa wicked heart, and must pray to God to change it and giveher a new and clean one. Why must Mr. Brocklehurst beso harsh with such a young child? Would a truely Christianman ever be so quick to condemn someone he doesntknow anything about?Eventually Jane moves to Lowood Institution, an old,drafty, dreary place. It is there that Jane comes to realizethat although Mr. Brocklehurst was able to put on a goodshow at Gateshead Hall about his religious beliefs, he islacking in basic human necessities. The meals that wereserved were meager portions; during some occasions itwas burned. Her knowledge of the shortcomings atLowood were supported when she over heard the teacherswhisper Abominable stuff! How Shameful!(Bronte,499). We will write a custom essay on Who is a True Christian? specifically for you for only $16.38 $13.9/page Order now This situation along with the dreadfully cold sleepingquarters show that Mr. Brocklehurst althoughknowledgeable in biblical psalms and parables had noconcern with the conditions these children lived in. Also,when Jane accidentally breaks her slate he punishes her bymaking her stand on a high stool as punishment. From thispoint onward in the novel, it is clear that Mr. Brocklehurstsymbolizes hypocrisy and insensitivity. In particular, Mr. Brocklehurst was complaining aboutholes in stockings and expounding the virtues of a goodChristian, he is interrupted by his fashionably dressed wifeand two daughters. Their ostrich plumes, beaver hats andfalse French curls contrast with the cold, underdressedchildren huddling over a fire to keep warm. Obviously mostof the donated money is used to spoil his family, and notbeing used for what it was given for. Is this the behavior ofa true Christian? Jane doesnt not think so, but she is smartenough to disregard things she can not change and is ableto find a few role models that influence her development. Janes relationship with Helen Burns seems to strengthenher belief in God. Helen tells Jane that she is happy, andthat she doesnt want Jane to grieve her death. By dyingshe is escaping great sufferings, and that she has strong faithin God. Helen also tells Jane about her beliefs in heaven. She says, I am sure there is a future state; I believe God isgod; I can resign my immortal part to him without anymisgivings. God is my father; God is my friend: I love him; Ibelieve he loves me(525). After Helen tells her this shefeels dearer to her, the reader can feel an emotional bondbetween the two girls and the sense of a developing ofstrong faith. Eventually, Jane meets a man named St. John Rivers whotakes her in as a poor, helpless woman. Later they feel anattraction toward each other that must be avoided becausethey learn that they are distant relations. She notices that St. .uc64af9ef90d9138f2e17000df2bc9c96 , .uc64af9ef90d9138f2e17000df2bc9c96 .postImageUrl , .uc64af9ef90d9138f2e17000df2bc9c96 .centered-text-area { min-height: 80px; position: relative; } .uc64af9ef90d9138f2e17000df2bc9c96 , .uc64af9ef90d9138f2e17000df2bc9c96:hover , .uc64af9ef90d9138f2e17000df2bc9c96:visited , .uc64af9ef90d9138f2e17000df2bc9c96:active { border:0!important; } .uc64af9ef90d9138f2e17000df2bc9c96 .clearfix:after { content: ""; display: table; clear: both; } .uc64af9ef90d9138f2e17000df2bc9c96 { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .uc64af9ef90d9138f2e17000df2bc9c96:active , .uc64af9ef90d9138f2e17000df2bc9c96:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .uc64af9ef90d9138f2e17000df2bc9c96 .centered-text-area { width: 100%; position: relative ; } .uc64af9ef90d9138f2e17000df2bc9c96 .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .uc64af9ef90d9138f2e17000df2bc9c96 .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .uc64af9ef90d9138f2e17000df2bc9c96 .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .uc64af9ef90d9138f2e17000df2bc9c96:hover .ctaButton { background-color: #34495E!important; } .uc64af9ef90d9138f2e17000df2bc9c96 .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .uc64af9ef90d9138f2e17000df2bc9c96 .uc64af9ef90d9138f2e17000df2bc9c96-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .uc64af9ef90d9138f2e17000df2bc9c96:after { content: ""; display: block; clear: both; } READ: The Most Dangerous Game EssayJohn is a good-hearted, caring man with strong faith inGod. She appreciates those qualities and almost falls inlove with him. St. John asks her to join him on a religiousmission in India. Think that she was not a woman with amind of her own he tries to convince her by saying Godand Nature intended you for a missionarys wife Amissionarys wife you must-shall be. You shall be mine: Iclaim you-nor for my pleasure, but for my Sovereignsservice.(749)She almost accepts but comes to realize that he wants herto be his wife not his companion to spread the word ofGod. She feels a brotherly bond with St.John which wouldmake marrying him a seem an incestuou s activity whichmaybe a condemnatory offense in the eyes of God whomshe does not want to offend. Also she begins to realize thathis religious missions are not done from the heart, he feels itis his job. She is confused that a self- proclaimed man ofGod could overlook such a situation.Jane makes it clearthat she does not want to be a part of his proposal. After comparing these two characters the reader can seethat there are major differences in their belief or beliefs inGod. Both Mr. Brocklehurst and St.John Rivers have avery narrow-minded view of God. They believe thatmemorization and recitation of psalms and Scripturereadings will get you to heaven, but they dont realize thathuman neglect is looked down upon by God. While Janeon the other hand has a more worldly, open-minded viewof God. That not only must a person be knowledgeable ofwhat He has done and what He expects of us, but that wemust care for each other as we care for ourselves. Janebelieves that God accepts people by what is in their heartHe will not be fooled by the masks or religious fronts thatpeople wear and build. Also, note that she does not hate them because of theirhypocritical ways she hopes that their eyes open to whatthey are doing, and chooses not to get to involved. Jane isa very intelligent woman, and though she has had a hard lifeshe still knows to lead with her mind and love with herheart.She exemplifies a true christian. Religion