Country Risk And Effects Of Foreign Direct Investment Cover Image

Rizik zemlje i efekti stranih direktnih investicija
Country Risk And Effects Of Foreign Direct Investment

Author(s): Jelena Stanković, Evica Petrović
Subject(s): Economy
Published by: Универзитет у Нишу
Keywords: Country risk; foreign direct investment; methods of country risk premium measurement; return on investment.

Summary/Abstract: This paper presents interconnection between risk and effects of foreign direct investment (FDI) on the domestic and foreign company with a special focus on the companies from the Republic of Serbia. Number of environment risks significant for making investment decisions of multinational corporations is significantly increased in the globalization process. Before making decisions about foreign investment, multinational companies tend to anticipate all potential risks, which may occur in the host country. Country risk, as one of the most important risks, occurs in the following two forms: risk of sovereignty and transfer/convertibility risk. Regarding the influence of country risk on the incomes of one cross-border investment, it has to be really evaluated. Numerous methods can be applied in measurement of country risk premium. The spread of potential effects, direct and indirect, from FDI is wide and affects both investors and domestic country. Presented data shows Serbia's participation in total world FDI inflow during the period 2000-2007, and also Serbia's participation in comparison to the FDI inflow of some European countries and former Yugoslav republics. The final part of the paper presents the relationship between risk and return on investment, as well as creating cross-border investment portfolio as an instrument for risk reducing.

  • Issue Year: 2009
  • Issue No: 1
  • Page Range: 9-22
  • Page Count: 14
  • Language: English