Computing Assignment

Computing Assignment - Computer Assignment Topic...

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Computer Assignment Topic: International Investment in Insurance Services in the US Fins 5516—International Corporate Finance Maximum number of people allowed in one group is four. The assignment with the following group number is acceptable: one, two, or three. Recommended group number: 3. Required writing style: academically publishable paper (abstract, introduction, literature review, empirical testing and result analysis, conclusion, and references). Each of these components is ESSENTIAL for you to obtain a satisfactory mark in assignment. Required format of report: double line, maximum 20pages. 1
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Questions to be answered in this assignment: after econometric testing, have you found the eight factors in equation (4) of page six significant or not? Are they in the predicted signs (positive or negative)? 1. Introduction Foreign direct investment (FDI) 1 has been important for the world economy for decades and often functions as the principal vehicle of international capital movement, via which the integration of the global economy, or what is popularly known as “globalization”, is promoted (see for instance, Helpman and Krugman, 1989; and Ma, et al., 2000). There are several categories of FDI in the US, 2 one of which is the FDI in insurance services, as opposed to FDI in manufacturing or banking. In the past, there were extensive empirical studies on FDI in general, manufacturing and banking. 3 The recent literature regarding financial services includes Yamori (1998) and Moshirian (2001). More specifically, Yamori (1998) examines the factors affecting the location choice of Japanese multinational financial institutions. Moshirian (2001) analyzes and models FDI in banking services for the US, the UK and Germany. He finds that bilateral trade, banks’ foreign assets, the cost of capital, relative economic growth, exchange rates and FDI in non-finance industries are the major determinants of foreign investment in banking. The only 1 According to WTO (1996), FDI occurs when an investor based in the home country acquires an asset in the host country with the intent to manage that asset. There are three main categories of FDI: 1). Equity capital (the value of the MNC’s investment in shares of an enterprise in a foreign country). Ten per cent or more of the ordinary shares or voting power of an equity capital stake in an incorporated enterprise, or its equivalent in an unincorporated enterprise, is normally considered as a threshold for the control of assets. Mergers and acquisitions (M&A) and the creation of new facilities fall in this category. 2). Reinvested earnings (the MNC’s share of affiliate earnings not distributed as dividends or remitted to the MNC). 3). Other capital (short or long-term borrowing and lending of funds between the MNC and the affiliate). 2
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