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Overseas Direct Investments to the Wholly Owned Subsidiaries and Their Association with Indian Macroeconomic Factors


Affiliations
1 Assistant Professor, Department of Commerce (Aided), PSGR Krishnammal College for Women, Peelamedu, Coimbatore - 641 004, Tamil Nadu, India
2 Assistant Professor, Department of Commerce, St. Francis College for Women, Begumpet, Hyderabad - 500 016, Telangana, India

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Purpose : The present study focused on analyzing the macroeconomic factors of the home country (India) before investing in a wholly owned subsidiary (WOS) established in a foreign country. When an investment is made in a WOS, the entity must focus on several factors that would ensure profitability in the long run.

Methodology : The overseas investments to the WOS are made through equity, loan, and guarantee or a combination of the same. The study considered the total overseas direct investments to the WOSs. The performance of the total overseas investments was analyzed using descriptive statistics. The short-run and long-run associations between the total overseas direct investment and the macroeconomic factors of the home country were estimated by employing the Granger causality test and Johansen cointegration test.

Findings : The results proved the existence of a short-run association between select macroeconomic factors and overseas investments. A long-run association also existed between the variables.

Practical Implications : Apart from firm-specific factors, several macroeconomic factors should also be considered before investing. In this context, the study focused on the performance of the ODI from India to the WOS in particular and the home country’s macroeconomic factors that should be evaluated before investing in a foreign country.

Originality : Although several research studies were conducted on the performance and growth of overseas direct investments, studies about investments to the WOSs established abroad is a new research dimension in the area of overseas direct investments in the Indian scenario.


Keywords

overseas direct investment, wholly owned subsidiaries, macroeconomic factors, shortrun association, long-run association

JEL Classification Codes : F21, P33

Paper Submission Date : August 25, 2022 ; Paper sent back for Revision : May 5, 2023 ; Paper Acceptance Date : May 30, 2023 ; Paper Published Online : July 15, 2023

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  • Overseas Direct Investments to the Wholly Owned Subsidiaries and Their Association with Indian Macroeconomic Factors

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Authors

D. Vijayalakshmi
Assistant Professor, Department of Commerce (Aided), PSGR Krishnammal College for Women, Peelamedu, Coimbatore - 641 004, Tamil Nadu, India
Shalini K. Menon
Assistant Professor, Department of Commerce, St. Francis College for Women, Begumpet, Hyderabad - 500 016, Telangana, India

Abstract


Purpose : The present study focused on analyzing the macroeconomic factors of the home country (India) before investing in a wholly owned subsidiary (WOS) established in a foreign country. When an investment is made in a WOS, the entity must focus on several factors that would ensure profitability in the long run.

Methodology : The overseas investments to the WOS are made through equity, loan, and guarantee or a combination of the same. The study considered the total overseas direct investments to the WOSs. The performance of the total overseas investments was analyzed using descriptive statistics. The short-run and long-run associations between the total overseas direct investment and the macroeconomic factors of the home country were estimated by employing the Granger causality test and Johansen cointegration test.

Findings : The results proved the existence of a short-run association between select macroeconomic factors and overseas investments. A long-run association also existed between the variables.

Practical Implications : Apart from firm-specific factors, several macroeconomic factors should also be considered before investing. In this context, the study focused on the performance of the ODI from India to the WOS in particular and the home country’s macroeconomic factors that should be evaluated before investing in a foreign country.

Originality : Although several research studies were conducted on the performance and growth of overseas direct investments, studies about investments to the WOSs established abroad is a new research dimension in the area of overseas direct investments in the Indian scenario.


Keywords


overseas direct investment, wholly owned subsidiaries, macroeconomic factors, shortrun association, long-run association

JEL Classification Codes : F21, P33

Paper Submission Date : August 25, 2022 ; Paper sent back for Revision : May 5, 2023 ; Paper Acceptance Date : May 30, 2023 ; Paper Published Online : July 15, 2023




DOI: https://doi.org/10.17010/ijf%2F2023%2Fv17i7%2F170039