If goods and financial markets are segmented across national borders but are otherwise efficient, then multinational corporations can reduce their cost of capital through foreign direct investment or through financing from foreign sources or both.

Question

Quizplus · Accepted Answer

Multinational corporations can take advantage of differences in interest rates and market conditions across borders to source cheaper financing or invest in projects with lower costs of capital. This allows them to increase their profitability and competitiveness in segmented markets.

If Goods and Financial Markets Are Segmented Across National Borders