In general, increased investment by the parent in the foreign subsidiary causes more exchange rate exposure to the parent over time because the cash flows remitted to the parent will be larger.

Question

Quizplus · Accepted Answer

When the parent increases investment in the foreign subsidiary, it will lead to larger cash flows remitted to the parent, which enhances the exposure of the parent to foreign exchange rate fluctuations. As a result, the parent becomes more vulnerable to currency risks as the investment in the foreign subsidiary expands.

In General, Increased Investment by the Parent in the Foreign