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Nova Southeastern University
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Running head: RISKS THAT FOREIGN INVESTORS CONFRONT 1
Exchange Rate Market and Legal/Political Risks That Foreign Investors Confront
Student’s Name
Institutional Affiliation
Course Name and Number
Professor’s Name
Assignment Due Date

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RISKS THAT FOREIGN INVESTORS CONFRONT 2
Exchange Rate Market and Legal/Political Risks That Foreign Investors Confront
Foreign investment involves an individual or a company from one nation by acquiring
ownership or establishing new investments in another country. In this concept, the investing
company may be attracted to various policies and incentives such as appropriate technology,
cheap labor, availability of raw materials, and favorable taxes in the destined country. Direct
investments involve physical investments such as factories, whereas indirect investments involve
purchasing stakes in companies. Although foreign investments benefit the host country, it is
hampered by various legal, political and exchange rate market risks such as; government
interference through unfavorable government policies, difficulty in conversion and transfer of
currency caused by economic uncertainties, political violence, and stability and economic
uncertainties.
Legal and Political Risks
To start with, government interference through unfavorable economic policies and
regulations hinders the activities of foreign investors. International businesses are greatly
affected by the various measures, regulations, policies, and directives issued by governments
they operate under (Eiteman & Stonehill, 2013). Some of the policies, including tax incentives
and political will, affect investment decisions and return on capital by investors either positively
or adversely. One instance can be exemplified by government directives such as tax holidays that
countries issue to protect their domestic businesses from unfair foreign competition. In this
regard, the same governments issue directives such as higher taxation on foreign businesses, thus
limiting the access to a smooth and ample business environment by foreign investors.
Additionally, diplomacy rows may affect how countries relate to each other in different scopes
(Protopsaltis, 2019). Accordingly, countries that experience constant tensions with each other
may not conduct business efficiently together. Therefore, a significant adverse impact is tossed
to the investors leading to subsequent losses in the long run. One of the most recent experiences
of economic tensions involving the United States of America and China has led to the constant

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Running head: RISKS THAT FOREIGN INVESTORS CONFRONT Exchange Rate Market and Legal/Political Risks That Foreign Investors Confront Student’s Name Institutional Affiliation Course Name and Number Professor’s Name Assignment Due Date 1 RISKS THAT FOREIGN INVESTORS CONFRONT 2 Exchange Rate Market and Legal/Political Risks That Foreign Investors Confront Foreign investment involves an individual or a company from one nation by acquiring ownership or establishing new investments in another country. In this concept, the investing company may be attracted to various policies and incentives such as appropriate technology, cheap labor, availability of raw materials, and favorable taxes in the destined country. Direct investments involve physical investments such as factories, whereas indirect investments involve purchasing stakes in companies. Although foreign investments benefit the host country, it is hampered by various legal, political and exchange rate market risks such as; government interference through unfavorable government policies, difficulty in conversion and transfer of currency caused by economic uncertainties, political violence, and stability and economic uncertainties. Legal and Political Risks To start with, government interference through unfavorable economic policies and regulations hinders the activities of foreign investors. International businesses are greatly affected by the various measures, regulations, policies, and directives issued by governments ...
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