Inward FDI in Germany and its policy context
With a stable economic and political system, open capital markets, the largest domestic market in Europe, and European Union (EU) membership, Germany has attracted competitive and export-oriented multinational enterprises (MNEs) since the 1960s. In the 1990s —after German unification and the opening up of Eastern Europe— inward foreign direct investment (IFDI) grew more slowly than expected despite the increased market potential. In recent years, the German economy strengthened and the wage and cost gaps against its main competitors narrowed, contributing to higher IFDI. With the financial and economic crises, German IFDI declined considerably in 2008 but started to rise again in 2009. At the end of 2008, Germany ranked among the top four developed countries as host for IFDI. Germany's open investment regime was tightened in 2009, in reaction to the emergence of sovereign wealth funds (SWFs). Trends and developments Country-level developments The successful reintegration of Germany into the world economy after the Second World War, as well as the European unification process, stimulated IFDI in Germany. Already in the 1960s, many of the largest MNEs worldwide (like General Motors or IBM) had established affiliates in Germany. In 1990, the year of the German reunification, the consolidated primary and secondary IFDI stock amounted to US$ 111 billion. 1 Since then, it has risen six-fold, to reach US$ 666 * Thomas Jost (thomas.jost@h-ab.de) is Professor of Economics at the University of Applied Sciences Aschaffenburg. The author wishes to thank Alexandra Angress, Jörn Kleinert and Beatrix Stejskal-Passler for their helpful comments. The views expressed by the author of this Profile do not necessarily reflect opinions of Columbia University, its partners and supporters. Columbia FDI Profiles is a peer-reviewed series. 1 The German inward FDI stock figures that are used most for analysis in this article are consolidated primary and secondary direct investment stock figures. This is a very special calculation done by Deutsche Bundesbank, looking through dependent (majority foreign owned) holding companies in Germany and including their direct investment enterprises in Germany. These figures are not comparable with the figures of most other countries, taking only primary FDI into account. The primary FDI stock in Germany is much higher than the consolidated primary and secondary one, because FDI in dependent holding companies is much higher than the FDI stock in their direct investment enterprises, which replace the dependent holding companies by consolidation. The reason for this is that the holding companies receive …
Offshore investments-cui prodis? Schrodinger's cat in offshore financing: Both alive and dead
Trends of FDI in offshore tax havens were compared to efforts and efficiency of regulatory authorities to prevent money laundering. Based on available data it was stated that current position in offshore FDI stays alive and officially dead at the same time, keeping the balance of interests for the main stakeholders: corporations, authorities and financial institutes support further offshore investments. Analysis based on volumes of trade and financial transactions between offshore centers, developed and developing countries. As a result withdrawal of financial resources from the developing countries degrades social capital funding and supports corruption growth.
THE FINANCIAL IMPACT OF SOVEREIGN WEALTH FUND INVESTMENTS IN LISTED COMPANIES
This paper initiates empirical research on the financial impact and wealth effects of Sovereign Wealth Fund (SWF) investments in the stock of listed companies around the world. SWFs have recently gained media attention because of concerns about their large size (USD 3.3 trillion), extremely rapid growth rates, and lack of transparency. We analyze asset allocation by fund and find a significantly positive 1% mean abnormal return upon announcement of 75 SWF acquisitions of equity stakes in publicly traded companies around the world. We note that SWFs are typically long term investors who, due to both political pressures and size of holdings, are often unwilling to quickly unwind their positions. However, two-year abnormal returns of SWFs average a significantly negative 41%, suggesting equity acquisitions by SWFs are followed by deteriorating firm performance. Please address correspondence to: William L. Megginson Price College of Business 307 West Brooks, 205A Adams Hall The University of Oklahoma Noman, OK 73019-4005 Tel: (405) 325-2058; Fax: (405) 325-7688 e-mail: wmegginson@ou.edu website: http://faculty-staff.ou.edu/M/William.L.Megginson-1 THE FINANCIAL IMPACT OF SOVEREIGN WEALTH FUND INVESTMENTS IN LISTED COMPANIES *