Working Paper No. 767

Finance-specific Factors as Drivers of Cross-border Investment – An OLI Perspective

Published: September 23, 2008Pages: 34Keywords: FDI; OLI; Cross-border Acquisitions; Cost of Capital; Financial Strategy; Financial VariablesJEL-codes: E22, F21, F23, L23

Finance-specific Factors as Drivers of Cross-border Investment – An OLI Perspective Jens Forssbaeck and Lars Oxelheim

In this paper we empirically test the role of firm-specific financial characteristics as drivers of international investment and production. We hypothesize that financial strength generates advantages that can be exploited through cross-border investment activity. The hypothesis is tested in a series of binary-response models, using a sample of 1379 European non-financial firms’ international acquisitions. Controlling for traditional firm- and target-country-specific FDI determinants within an OLI framework, we find strong evidence that financial factors play a significant role in explaining cross-border investment. We conclude that without explicit consideration of the financial dimension, firms’ FDI decisions cannot be properly understood.


Lars Oxelheim


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Sick of Inequality?

An Introduction to the Relationship between Inequality and Health

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In this book Andreas Bergh, Therese Nilsson, IFN and Lund University, and Daniel Waldenström, IFN and Paris School of Economics, France, review the latest research on the relationship between inequality and health. What does inequality mean for our health? Does increasing income inequality affect outcomes such as obesity, life expectancy and subjective well-being?


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