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PurposeThis study aims to investigate the impact of exchange rate volatility and the risk of expropriation on the decision to repatriate foreign earnings.Design/methodology/approachThe current study uses secondary data for foreign subsidiaries of US multinational corporations (MNCs) in 40 countries from 2004 to 2016. We use the dynamic panel difference generalised method of moments (GMM) to estimate the dynamic earnings repatriation model.FindingsThe findings show that foreign subsidiaries of US MNCs in countries with volatile exchange rates tend to repatriate more earnings to the parent company. The findings also reveal that a greater risk of expropriation in the host country leads to the higher repatriation of foreign earnings to the parent company. The findings support the notion that MNCs use the earnings repatriation policy as a means of mitigating risks arising in the host country.Practical implicationsPractical implications for modern managers include shedding light on how financial managers can use earnings repatriation policy to mitigate exchange rate risk and the risk of expropriation in the host country. The findings also contain policy implications at the host country level that how exchange rate volatility and risk of expropriation can reduce foreign investment in the host country.Originality/valueThis study adds to the earnings repatriation literature by analysing the direct effect of exchange rate volatility on earnings repatriation decisions, as opposed to the impact of the exchange rate itself, as suggested by previous research. Hence, the findings broaden our understanding of the direct influence of exchange rate volatility on the decision to repatriate foreign earnings. The present study also examines the role of the risk of expropriation in determining earnings repatriation policy, which has received little attention in prior empirical studies.

This article examines the concepts of obsolescing bargain and economic equilibrium in international energy investment contracts. Equilibrium means the balance of interests that the parties’ contract embodies. Part of the idea of equilibrium is to entrench a way to keep their interests in harmony. Equilibrium is the point that host governments and foreign investors reach at the time when they strike the bargain. The equilibrium is stable if it is resilient to events which challenge it and have the potential of disrupting the balance. The point to the obsolescing bargain model is that the equilibrium is inherently unstable and therefore, there is a need for a proper framework surrounding the investment contract in order to reinforce the stability of the equilibrium. This is the key point the obsolescing bargain model makes in relation to the instability of the contractual equilibrium. If we look at it such relationship as a one-off set of rights and duties, then it is unstable. But, instead if we look at the equilibrium as a relationship that is dynamic and evolves, then it can be stable. This article underscores the significance of maintaining equilibrium in the relation of foreign investor and host state to avoid obsolescing bargain and international investment disputes. Economic equilibrium, foreign investor, host state, international energy investment contracts, obsolescing bargain, risk of expropriation, international investment disputes, contractual flexibility, allocation of risk, contractual stability

'Investor Protection and Corporate Governance' analyzes the impact of corporate governance on firm performance and valuation. Using unique datasets gathered at the firm-level—the first such data in the region—and results from a homogeneous corporate governance questionnaire, the book examines corporate governance characteristics, ownership structures, dividend policies, and performance measures. The book's analysis reveals the very high levels of ownership and voting rights concentrations and monolithic governance structures in the largest samples of Latin American companies up to now, and new data emphasize the importance of specific characteristics of the investor protection regimes in several Latin American countries. By and large, those firms with better governance measures across several dimensions are granted higher valuations and thus lower cost of capital. This title will be useful to researchers, policy makers, government officials, and other professionals involved in corporate governance, economic policy, and business finance, law, and management.

Equity and growth are central concerns for development in Mexico. Specific inequalities in income, power, wealth, and status create and sustain economic institutions and policies that perpetuate these inequalities and promote poor economic performace. 'No Growth without Equity? Inequality, Interests, and Competition in Mexico' presents a novel analysis showing why more equality is necessary to increase economic growth. The authors analyze the causes of persistent inequality and weak growth in Mexico, despite major changes associated with NAFTA and democratization, and draw implications for policy design. The book involves an innovative synthesis of work on overall links between equity and growth, and carefully grounded analysis in specific areas. The issues are of intense interest to policy debate in Mexico and to the development community in Latin America and elsewhere.

Expropriation risk has a binding effect on foreign direct investment (FDI). However, state-owned multinational corporations may counter the monopoly power of the host state by leveraging the political influence of their home government. The magnitude of this counter force, we argue, may vary, depending on the strength of political relations between the home and host state, and the level of economic dependence of the host country on the home market. We find supporting evidence of our hypotheses using Chinese firm-level FDI information between 2003 and 2010.

Two arguments are important: that the rule of law and the security of property rights are important for growth and that they are the product of political institutions. Professor Dixit argues that identification and other concerns undermine the second argument and inhibit the formulation of policy recommendations. Avinash Dixit reviews many of the recent contributions to the literature that examine the \"big\" questions in economic development, particularly those concerning the fundamental differences between countries that manage to sustain rapid economic growth and those that do not. Practitioners can nevertheless learn from the generalizations that academic research yields, but they should examine the plausibility of those generalizations, taking into account the many idiosyncrasies The Author 2007. These are based on particular historical and geographic features of countries that researchers theorize should determine the security of property rights but that should not directly affect growth. Just as important, compared with such determinants of political behavior as history and regime type, theses sources of variation in political incentives have at least somewhat more tractable policy implications for what donors and governments should and should not do. Incremental approaches that fail to take the conditions of political decision-making into account in a systematic way are no more likely to succeed than \"maximalist\" approaches. Less targeted programs, in which targeting is crude but easy to communicate and simple to implement, may offer a greater contribution to development by building political credibility, even at the cost of economic inefficiency. From the first Public Expenditure Tracking Philip Keefer 163 Survey in Uganda, which led to a 90 percent reduction in the diversion of capitation grants to schools, to report cards on public services, pioneered in Bangalore, India, but expanding to China and elsewhere, a variety of tactics are emerging to close the information gap between citizens and politicians. Despite this--despite the fact that such analyses are concerned with big ideas--this line of research shows considerable promise in informing both the content and the design of the reform agenda in countryspecific contexts.

States burdened with conflict have been considered to be undesirable destinations for foreign direct investment (FDI) due to, inter alia, political instability, regulatory unpredictability, and expropriation risk. However, we develop an alternative view based on corporate governance and real option theories. We analyze a dataset of FDI location decisions made in the Oil and Gas sector by 250 US firms across 44 countries between 2007 and 2013. After controlling for energy reserves, the results show counter-intuitively, that civil war and terrorism risks, and terrorist events are positively associated with US investment in Oil and Gas. US subsidiaries also show high levels of ownership commitment. It is tempting to conclude that US Oil and Gas is a wholly unique, resource-bound case, but we argue that this disconnect may have occurred for two reasons. First, a threat of conflict and violence can make MNEs exercise their growth options and expand resource extraction sooner rather than later. Second, political instability does not necessarily lead to higher levels of FDI expropriation risk. On the contrary, instability can reduce the incentives for the state to seize assets from technologically superior MNEs, i.e. it may reduce expropriation risk. Just as the rule of law and 'good' governance can constrain a state from expropriation, there are theoretical reasons why 'bad' governance resulting from instability and incapacity may do so, too.

I study a model of investment and sale of ideas and test its empirical implications using a novel data set from the market for original movie ideas. Consistent with the theoretical results, I find that buyers are reluctant to meet unproven sellers for early-stage ideas, which restricts sellers to either developing the ideas fully (to sell them later) or abandoning them. In contrast, experienced sellers can attract buyers at any stage, and they sell worse ideas sooner and better ideas later. These results have important managerial implications for buyers and sellers and show that, in such contexts, policy interventions that discourage buyer participation—such as stronger intellectual property protection—may diminish the market for ideas and hurt inexperienced sellers. This paper was accepted by Bruno Cassiman, business strategy.

This study examines the impact of political risk on Chinese outward foreign direct investment (OFDI) and what motivates their preferred location. The study also analyzes the OFDI of other countries to enhance the comparison of China and other countries' OFDI sensitivity to political risk. The study used annual panel data on 134 countries from 2003 to 2017. The results indicate that China's OFDI tends to favor countries and regions with higher expropriation risk, and China's OFDI exhibits strong resource-seeking motives and weak market-seeking motives. On the other hand, OFDI in countries around the world tends to favor countries and regions with lower expropriation risk and conflict risk, and OFDI in those countries exhibits market-seeking motives. The study results also show that China's political risk preference and investment motives depend on the level of economic development and the presence of natural resources in the host country.

This article analyses the relevance of the agency problems that exist between shareholders and managers (type I agency problems) and between majority and minority shareholders (type II agency problems), in determining the composition of the board of directors, differentiating between family owned and non-family owned firms. The hypotheses are tested on a sample of 173 Spanish listed companies for the period 2004–2011. The results of our study indicate that, on one hand, as type I agency problems increase, firms increase their percentage of outside directors and, on the other, as type II agency problems increase, firms increase the ratio of independent to nominee directors. Whether the company is a family firm or not does moderate the influence of insider ownership over the composition of the board. Generally speaking, our findings support the view that firms configure their board of directors in such a way as to best signal to the market both efficient management and a balance of the interests of all shareholders. Likewise, these results could be taken into account when formulating recommendations on the composition of the board of directors.