Exam 16: Foreign Direct Investment and Cross-Border Acquisitions

Shareholders of U.S.bidders (acquiring firms in M&A)experience significant positive abnormal returns when firms expand into new industries and geographic markets.

Which of the following statements is true about product life cycle theory?

The majority of foreign vertical integration is

U.S.car makers were forced to build their own network of dealerships to enter the Japanese market.

Governments regulate international trade

Whether or not cross-border acquisitions produce synergistic gains and how such gains are divided between acquiring and target firms

An example of forward vertical FDI is when

Firms that have intangible assets with a public good property tend to invest directly in foreign countries.This is

In 1992,the Enron Development Corporation,a subsidiary of the Houston-based energy company,signed a contract to build the largest-ever power plant in India,requiring a total investment of $2.8 billion.After Enron had spent nearly $300 million,the project was canceled by Hindu nationalist politicians in the Maharashtra state where the plant was to be built.Which of the following are true?

If cross-border acquisitions generate synergistic gains,

Country risk

When evaluating a foreign investment project,it is important for the MNC to consider the effect of political risk,as a sovereign country can change "the rules of the game." To account for this

Examples of operational risk include

Honda's decision to build a plant in Ohio

As a mode of FDI entry,cross-border M&A offers two key advantages over greenfield investments:

MNCs might have been lured to invest in China not only by lower labor and material costs,but also

Trade barriers can arise naturally.Which of the following are natural barriers to trade?

Since shareholders of MNCs may indirectly benefit from corporate international diversification,

Intangible assets are often hard to package and sell to foreigners

International markets for goods and services are often imperfect.Which is the most common and most important?