POLS1005 Chapter Notes - Chapter 8: Foreign Direct Investment, Portfolio Investment, Foreign Corporation
19 Jul 2018
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Puzzle: every year, approximately trillion is invested abroad. The principal varieties of foreign investments can be grouped in two broad categories: portfolio investments and direct investments. Portfolio investment: investment in a foreign country via the purchase of stocks (equities), bonds, or other nancial instruments. Portfolio investors do not exercise managerial control of the foreign operation. (loans) A substantial portion of the portfolio investment that goes to developing countries is sovereign lending. Sovereign lending: loans from private nancial institutions in one country to sovereign governments in other countries. Foreign direct investment (fdi): investment in a foreign country via the acquisition of a local facility or the establishment of a new facility. Direct investors maintain managerial control of the foreign operation. Banks, corporations and individuals make investments abroad with a clear goal: to make money. Those with capital want to move money from where pro ts are lower to where pro ts are higher.
