19.4 Long-Term Investment and Financing Decisions

  1. LG4

Important long-term aspects of international managerial finance include foreign direct investment, investment cash flows and decisions, capital structure, long-term debt, and equity capital. Here we consider the international dimensions of these topics.

Foreign Direct Investment

Foreign direct investment (FDI) is the transfer of capital, managerial, and technical assets to a foreign country by a multinational firm. We can explain FDI on the basis of two main approaches: the OLI paradigm and strategic motives by MNCs. The first encompasses “O” (owner-specific) advantages in an MNC’s home market, “L” (location-specific) characteristics abroad, and “I” (internalization) through which the ...

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