Foreign Direct Investment Decisions of Multinational Corporations: Focusing on Financial Constraints

This paper analyzed the financial factors affecting foreign direct investment. The 2018 and 2020 financial statements and subsidiary data were collected from 39 online companies in Korea, China, and the United States. We conducted a generalized linear model using the FDI level as dependent variable and tax haven FDI, the previous year’s debt level, previous year’s free cash flow, growth rate, previous year’s capital expenditure for independent variables. In order to control the endogeneity between foreign investment and debt, the relationship between the previous year's data and foreign investment was analyzed. As a result of the study, it was found that the previous year's debt level, the previous year's growth, the the previous year's sales growth rate, and the previous year's capital expenditure were related to the foreign investment of online companies. The analysis found that debt and free cash flow have substitutability. Finally, when firms increase their foreign investment, they reduce their domestic capital expenditure. This paper contributes to providing a comprehensive insight into how capital-constrained companies allocate their investment resources.