Foreign Direct Investment in Brazil and Home Country Risk

This study looks into the factors that explain foreign direct investment in Brazil by country of origin of investment. Based on a sample of more than 100 countries that invested and have not yet invested in Brazil, multiple estimation techniques, such as the Tobit, Heckit and Probit, are used to isolate the effect of country risk on outward foreign direct investment. In sharp contrast to the findings of previous studies on the effect of home country risk on foreign investment in the United States, the findings in this paper reveal that less risky countries invest more in Brazil. These results are controlled for size of the home country, distance, trade intensity and previous investments abroad. A simple out of sample check shows that the model correctly predicts probability of investing for a large number of countries. The existing literature does not document these results.Foreign Direct Investment; Country Risk; Tobit and Heckit Estimation

The Determinants of Venture Capital in Europe—Evidence Across Countries

Abstract This article analyses the determinants of European venture capital activity. The main novelty of our work is in accounting for the idiosyncrasies of the European venture capital market. In particular, we investigate whether the size of the merger and acquisition market (M&A) is important in explaining venture capital. Moreover, our work is the first that analyses the impact of the degree of information asymmetry at the macro level, the direct impact of the level of entrepreneurial activity and the impact of the unemployment rate on venture capital activity. We use aggregate data from 23 European countries for the period 1998–2003 to estimate panel data models with fixed and random effects. Our results reveal that the size of the M&A market and the market-to-book ratio have a positive impact on venture capital activity whereas the unemployment rate influences the venture capital market negatively. These results highlight the importance of the exit environment and of the degree of asymmetric information for the venture capital market

A theoretical perspective on the location of banking FDI

The paper models location of banking FDI under volatile demand conditions. In the model, information arrives either through passage of time or though presence in the foreign market. The model is also extended to analyze strategic and simultaneous FDI. The results show that market entry evolves from deferring FDI to partial FDI and only then to full FDI. The switch to partial FDI occurs faster when banks can gather information only through a presence in the foreign market. The switch to partial FDI does not occur when immediate full FDI enables more efficient production. The results are at odds with models developed for predictable demand conditions in which banks switch straight from deferring FDI to full FDI. The paper generates an integrated view of the location of banking FDI.info:eu-repo/semantics/acceptedVersio

The influence of foreign equity and board membership on corporate strategy and management of internal costs in Portuguese banks

This study examines the influence of foreign equity and board membership on corporate strategy and the management of internal costs of banks headquartered in Portugal using proprietary data maintained by the Central Bank. The findings reveal that foreign equity reduces both total and operating costs, and foreign board membership reduces domestic banks’ dependence on revenues from traditional areas of business and enhances the potential for generating revenues from non-traditional areas of business. These results are controlled for a variety of standard accounting ratios used in the literature. We argue that foreign equity and board membership forces banks to redirect corporate strategy and to reduce internal costs.info:eu-repo/semantics/acceptedVersio

Foreign direct investment in Brazil and home country risk

This study looks into the factors that explain foreign direct investment in Brazil by country of origin of investment. Based on a sample of more than 100 countries that invested and have not yet invested in Brazil, multiple estimation techniques, such as the Tobit, Heckit and Probit, are used to isolate the effect of country risk on outward foreign direct investment. In sharp contrast to the findings of previous studies on the effect of home country risk on foreign investment in the United States, the findings in this paper reveal that less risky countries invest more in Brazil. These results are controlled for size of the home country, distance, trade intensity and previous investments abroad. A simple out of sample check shows that the model correctly predicts probability of investing for a large number of countries. The existing literature does not document these results

The influence of managerial ownership on bank market value, performance, and risk: evidence from banks listed on the stoxx global index

WOS:000305692200002 (Nº de Acesso Web of Science)We follow agency theory to assess the influence of managerial ownership on the market value, performance, and risk of 123 listed banks in 23 countries included in the STOXX Global Index in 2007 and 2010. After controlling for bank characteristics, regulatory restrictions, and macroeconomic conditions, our findings show a positive relation between managerial ownership and both market value (Tobin's Q) and performance (ROA and ROE). Moreover, we find a negative relation between managerial ownership and risk (EDF, NPL/L, and Z-SCORE). Bank market value and performance is a non-linear, inverse U-shaped function of managerial ownership. The negative relation between managerial ownership and bank risk is also non-linear and U-shaped. Our results remain robust to reverse causality. In their effort to immunize the global financial system from systemic risks, central banks and practitioners should find our results relevant for regulation purposes

Do multinational banks create or destroy shareholder value? A cross-country analysis

We question whether the international diversification of multinational banks creates or destroys shareholder value. Based on a sample of 384 listed banks from 56 countries we provide new and robust evidence that bank cross-border activities create shareholder value, as shown by an economically and statistically significant premium for international diversification. Our results are confirmed controlling for bank fixed effects, time-varying bank characteristics, reverse causality, functional diversification, and instrumenting for the choice to expand abroad. The increase in shareholder value is slightly larger for banks in the middle range of international diversification and in the case of expansion towards less developed countries.info:eu-repo/semantics/acceptedVersio

Bank business models, regulation, and the role of financial market participants in the global financial crisis

The recent financial crisis shone a spotlight on several key issues: bank regulation; bank models; and the relationship between traditional banking, the interbank markets and the markets for complex financial derivatives. Indeed, the role that derivatives such as Credit Default Swaps and Collateralised Debt Obligations played in the credit bubble and the subsequent credit crunch may appear to have made this financial crisis unique. However, the fundamental cause of this crisis, which led directly to the worst global recession since the 1930s, is all too familiar: ultimately, too much money was lent to too many people who could not afford to pay it back. It was a classic bank crisis of over lending, but this time on a global scale

State interventions to rescue banks during the global financial crisis

We model unique state interventions to rescue commercial banks during the 2008-09 global financial crisis with the complementary binary logistic model that accommodates their skewed distribution. Our findings show that large and illiquid banks, and banks from countries with weak regulations, and weak shareholder and creditor rights are more likely to receive state interventions. These findings remain robust to a restricted definition of state intervention, alternative measures of bank fundamentals, placebo estimations, counterfactual sampling with propensity scores, bank and country sample splits, and the standard logistic model. These bank and incremental country level predictors can help regulators and supervisors limit future state interventions.info:eu-repo/semantics/acceptedVersio

The exit decision in the European venture capital market

This article analyses the exit decision in the European venture capital market, studying when to exit and how it interacts with the exit form. Using a competing risks model we study the impact on the exit decision of the characteristics of venture capital investors, of their investments and of contracting variables. Our results reveals that the hazard functions are non-monotonic for all exit forms and suggest that, in Europe, Initial Public Offering candidates take longer to be selected than trade sales. Moreover our results show that, in Europe, venture capitalists associated with financial institutions have quicker exits (stronger for trade sales), and highlight the importance of contracting variables on the exit decision. An unexpected result is that the presence on the board of directors leads to longer investment durations