With regard to the financial structure of a foreign subsidiary

Question

Quizplus · Accepted Answer

Using local financing can reduce political risk because it aligns the interests of the subsidiary with those of the host country. Additionally, financing a foreign investment with at least some local debt or equity can mitigate the risk of expropriation since it indicates a long-term commitment to the host country. However, there may be other advantages, such as access to local expertise and markets, that encourage MNCs to finance foreign subsidiaries with local money. Therefore, all of the given options are correct.

With Regard to the Financial Structure of a Foreign Subsidiary