Foreign Direct Investment and Shareholders' Wealth: Evidence from the Newly Industrialized Countries (NICS)
研究了美国跨国公司在亚洲四个新兴工业化国家（韩国、台湾、新加坡、香港）进行外国直接投资对股东财富的影响，发现无论是全资子公司还是国际合资企业，都带来正向的股价反应。
This study investigates the wealth effect of foreign direct investment (FDI) by U.S. multinationals in four Asian newly industrialized countries (NICs)- South Korea, Taiwan, Singapore, and Hong Kong. In addition, it examines wealth effects of two different types of FDI: wholly-owned subsidiary (FDI) and international joint venture (IJV). Results show that shareholders of U.S. MNCs benefit from the FDI in four Asian NICs. Stock prices of U.S. MNCs increase significantly surrounding the announcement dates of FDI. Both types of FDIwholly-owned subsidiary and international joint venture- in NICs by U.S. MNCs are wealthincreasing activities for their shareholders. INTRODUCTION A great deal of research has documented the positive wealth effect from overseas expansion (Lessard 1973; and Logue 1982). The wealth effects of those activities depend on the type of expansion and the destination countries. Exporting and licensing could result in different effects than foreign direct investment ( FDI)either through wholly owned subsidiary (WOS) or international joint venture (IJV). The destination countries in which multinationals (MNCs) operate could also have an impact on the shareholders' returns. The main purpose of this paper is to investigate the stock valuation effects of FDI into the four Asian Newly Industrialized Countries (NIC)South Korea, Taiwan, Singapore, and Hong Kong -on U.S. MNCs ' shareholders. Additionally, wealth effects from two different types of FDI-wholly owned subsidiary (WOS) investment and international joint venture (IJV)are compared based on the abnormal returns accrued to firms engaged in these activities. To do so, we examine the market reactions to the announcements of FDI. The results show that overall investors react favorably to FDI in NICs. The abnormal returns surrounding the announcement dates of FDI are significantly positive. When looking at the type of FDI, both WOS and IJV deliver positive stock price reactions around the announcement dates of the FDI by US MNCs in NICs. We do not find a significant difference between two types of FDI in terms of wealth effects. This paper is organized as following. Section 2 presents the prior literature related to the wealth effects of FDI activities on the shareholders wealth. Section 3 presents the data collection and event study methodology. Section 4 provides the empirical results. Finally, Section 5 concludes the study. LITERATURE REVIEW Numerous studies have reported that international expansion is beneficial to shareholders of firms engaged in such activities. A recent paper by Morck and Yeung (1991) maintains that internationalization creates incremental wealth for multinationals engaged in those activities. The wealth created from such activities derives from a variety of sources. For example, international diversification could result in decline in the firm's overall risk (Solnik 1974). Therefore, it subsequently increases the firm's value. Lummer and McConnell (1990) document that internationalization through an IJV generates positive wealth for the shareholders of MNCs engaged in such activities. In their recent paper, Mathur and Waheed (1991) document that investors are indifferent to the degree of industrialization of the host countries when firms expand overseas. Lee and Wyatt (1990) report that the overall markets' reactions to IJV are negative and that only joint ventures with lesser developed countries have nonnegative effects on the firm's value. The implication of these studies is that the economic development of the countries where U.S. MNCs invest may have the impact on the FDI success. This study attempts to examine the wealth effects of FDI on the shareholders' wealth. It differs from previous works in that it focuses on four Asian emerging markets. It attempts to provide further evidence on the US MNCs FDI wealth effects by examining four Asian NICs: South Korea, Taiwan, Singapore, and Hong Kong. Furthermore, this study examines whether the difference of wealth effect between two types of FDI- WOS and IJV is different. …