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.


Issue Date:
2003
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/26373
Total Pages:
23
JEL Codes:
D81; D92; E22; F21
Series Statement:
HWWA Discussion Paper 234




 Record created 2017-04-01, last modified 2017-08-24

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