Foreign direct investment and contract enforcement

Article Abstract:

Empirical evidence suggests that weak enforcement of binding contracts does not necessarily undermine foreign direct investment in developing countries. This conclusion was supported by an analysis of contractual arrangements between firms from different countries using a two-period, double-moral-hazard model. It was found that firms with foreign direct investments preferred non-binding contracts over binding ones. Another significant finding is that there has been substantial foreign direct investment in developing countries where binding contracts are not strictly enforced.

Administration of General Economic Programs, Economic Programs, Administration of Economic Programs, Foreign Investment Regulations, Contract Administration, Analysis, Interpretation and construction, Foreign investments, Economic policy, Developing countries, Foreign investment laws, Contract management

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Agency and self-enforcing contracts

Article Abstract:

Agents, rather than owners, may carry out interfirm contracts and contracts may be self-enforcing in that agents may have less incentive to breach contracts than owners.

Agency theory

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Liability sharing as a mechanism to improve firms' investment and liquidation decisions

Article Abstract:

Alliances between companies to share risk may help in tackling problems related to liquidation and investment.

Business, Industrial policy

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