Multinational Financing Strategies in High Political Risk Countries

Global Risk Assessments. Book 5, Jerry Rogers, ed., pp. 139-154, 2004

16 Pages Posted: 27 Apr 2002 Last revised: 24 Mar 2009

See all articles by Vincent J. Hooper

Vincent J. Hooper

SP Jain School of Global Management

Date Written: 2004

Abstract

This paper investigates the importance of various issues in relation to the financing of U.K. and U.S. multinationals' subsidiaries in high political risk countries. It is discovered that multinationals with operations in high risk countries adopt strategies which are nationally responsive to the host nation. The matching of assets with liabilities is considered to be an effective method for reducing exchange rate risk and political risk. Local debt is viewed as crucial to the management of political risk by harnessing local participants in the ownership structure of the firm. In addition, it is found that firms with operations in high risk countries tend to be relatively less centralised. Although, expropriation of multinationals' overseas assets has become a past occurrence, multinationals need to recognise the time-varying nature of political risks that they encounter.

Keywords: Political Risk, Local Debt, Host country, National Responsiveness, Multilateral Investment

JEL Classification: G15

Suggested Citation

Hooper, Vincent James, Multinational Financing Strategies in High Political Risk Countries (2004). Global Risk Assessments. Book 5, Jerry Rogers, ed., pp. 139-154, 2004, Available at SSRN: https://ssrn.com/abstract=307159 or http://dx.doi.org/10.2139/ssrn.307159

Vincent James Hooper (Contact Author)

SP Jain School of Global Management ( email )

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