THE IMPACT OF POLITICAL RISK ON THE FOREIGN DIRECT INVESTMENT DECISION: A CAPITAL BUDGETING ANALYSIS
作者:
DOROTHEEJ. FEILS,
FLORINM. ŞABAC,
期刊:
The Engineering Economist
(Taylor Available online 2000)
卷期:
Volume 45,
issue 2
页码: 129-143
ISSN:0013-791X
年代: 2000
DOI:10.1080/00137910008967541
出版商: Taylor & Francis Group
数据来源: Taylor
摘要:
Using a capital budgeting framework, we examine the impact of political risk on the foreign direct investment decision. Political risk may alter operating cash flows via discriminatory regulations as well as the investment via expropriation. We model the impact of political operating costs and expropriation costs on the NPV of a project under the assumption that the parameters that affect the NPV are constant over the life of the project. Next, we provide an illustration for the case in which the relevant parameters are variable over the life of the project. The paper concludes with an example of political risk in the 1990s, the case of Black Sea Energy Ltd.'s investment in Russia.
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