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Title:Option Value, Policy Uncertainty, and the Foreign Direct Investment Decision PDF Logo
Authors:Chen, Yu-Fu
Funke, Michael
Issue Date:2003
Series/Report no.:HWWA Discussion Paper 234
Abstract:In this paper we analyse the impact of policy uncertainty on foreign direct investment strategies. The paper follows the real options approach, which allows to investigate the value to a firm of waiting to invest and/or disinvest, when payoffs are stochastic due to political uncertainty and investments are partially reversible. Across the board we find that political uncertainty can be very detrimental to FDI decisions.
Subjects:Real options
Investment
Foreign Direct Investment
Political Uncertainty
JEL:F21
E22
D81
D92
Document Type:Working Paper
Appears in Collections:HWWA Discussion Paper, Hamburgisches Welt-Wirtschafts-Archiv

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