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Journal of Economic Integration 2007 June;22(2) :231-255.
Relative Access to Credit, Relative Wealth and FDI: Firm-Level Evidence from Japanese FDI into the United States

Joseph D. Alba Peiming Wang Woon-Yee Ho 

Nanyang Technological University
Auckland University of Technology
Copyright ©2007 Journal of Economic Integration

We use data on 317 Japanese firms to examine the effect of relative access to credit and relative wealth on the Japanese firm's rate of foreign direct investment (FDI) in the United States. Using the zero-inflated negative binomial model, we find that multiple rating downgrades of a firm's main bank significantly affected the Japanese firm's rate of FDI in the United States. This result holds for firms with the highest 20% of bonds-to-liabilities ratio indicating that banking problems in Japan affected even firms who could have financed their FDI with bonds. We also find that the firm's rate of FDI is affected by the firm's relative wealth.

JEL classification: F23, C35, G21

Keywords: Relative access to credit | Relative wealth | Exchange rate
1. Aoki, M., Patrick, H., Sheard, P. (1994) The Japanese main bank system: an introductory overview, in The Japanese Main Bank System (Eds.) Aoki, M., Patrick, H., Oxford University Press, Oxford, pp. 3-50.
2. Blonigen, B. (1997) Firm-specific assets and the link between exchange rates and foreign direct investment, American Economic Review 87, 447-465.
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