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International Investment: International Financial Flows (Cont.)
International Investment: International Financial Flows (Cont.)
INTERNATIONAL FINANCIAL
FLOWS (CONT.)
2/12/2012 2
PRIVATE FLOWS
- Formality level
- Liability
- Taxation
Return of investors
Technology transfer
FDI – Components
Equity capital
Reinvested earnings
Other capital
FPI – Definitions
IMF, Balance of Payment:
Portfolio investment is the category of
international investment that covers
investment in equity and debt securities,
excluding any such instruments that are
classified as direct investment or reserve
assets
FPI – Definitions (cont.)
Vu Chi Loc (1997), Foreign Investment:
Foreign portfolio investment is the category
of international investment that an investor in
one country buy securities of enterprises in
another country equal to or below a certain
threshold to gain profit but not control
those security issuers.
FPI – Characteristics
- No voice in management
Sornarajah (2004)
UNCTAD
- Return of investors
FPI – Characteristics (cont.)
- Less stable
- No technology transfer
FPI – Puzzle
Home bias puzzle
in equity portfolio investment
- Return of investor