Multinational companies can reduce the chance of a loss from expropriation by:
A)increasing the required rate of return a foreign subsidiary is expected to earn.
B)establishing foreign subsidiaries in countries that have restrictive policies on repatriation of earnings.
C)financing the foreign subsidiary using fund raised in the host country.
D)obtaining insurance against economic losses associated with expropriation.
E)investing all the funds in a single foreign subsidiary.

Question

Quizplus · Accepted Answer

Obtaining insurance against economic losses associated with expropriation can provide multinational companies with protection against the potential loss of their investments due to expropriation. This can provide a sense of security for the company and its investors, and may also provide investment incentives for the host country. The other choices (increasing required rate of return, establishing subsidiaries in restrictive countries, financing with host country funds, and investing all funds in a single subsidiary) are not effective strategies for reducing the risk of expropriation.

Multinational Companies Can Reduce the Chance of a Loss from Expropriation