Option Value, Policy Uncertainty, and the Foreign Direct Investment Decision

In this paper we analyse the impact of policy uncertainty on foreign direct investment strategies. The paper follows the real options approach, which allows to investigate the value to a firm of waiting to invest and/or disinvest, when payoffs are stochastic due to political uncertainty and investments are partially reversible. Across the board we find that political uncertainty can be very detrimental to FDI decisions.

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Year of publication:	2003
Authors:	Chen, Yu-Fu ; Funke, Michael
Institutions:	HWWA Institut für Wirtschaftsforschung
Subject:	Real options \| Investment \| Foreign Direct Investment \| Political Uncertainty

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Extent:	application/pdf
Series:	HWWA Discussion Papers. - ISSN 1616-4814.
Type of publication:	Book / Working Paper
Notes:	Number 234
Classification:	F21 - International Investment; Long-Term Capital Movements ; E22 - Capital; Investment (including Inventories); Capacity ; D81 - Criteria for Decision-Making under Risk and Uncertainty ; D92 - Intertemporal Firm Choice and Growth, Investment, or Financing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010957352