Partially Segmented International Capital Markets and International Capital Budgeting

28 Pages Posted: 29 May 2009 Last revised: 1 Jun 2009

See all articles by Evi Kaplanis

Evi Kaplanis

London Business School

Ian A. Cooper

London Business School

Multiple version iconThere are 2 versions of this paper

Date Written: September 1, 1996

Abstract

Evidence suggests that international capital markets are neither fully integrated nor completely segmented. There is, however, currently no general method available for computing the required return on corporate investments with such capital markets. This paper uses a model of partially integrated international capital markets to derive optimal international capital budgeting rules. We show how capital budgeting rules depend on the level of costs to cross-border investment, both directly and also indirectly through the portfolio specialization they induce. We explain how required returns differ for different companies in such markets and how these 'costs of capital' may be estimated. We also explain how such differences in required returns can be consistent with general equilibrium and the effect they have on incentives for foreign direct investment.

Keywords: Market segmentation and integration, international capital budgeting, cost of capital esitmates, global CAPM

JEL Classification: F230, G120, G310

Suggested Citation

Kaplanis, Evi and Cooper, Ian Anthony, Partially Segmented International Capital Markets and International Capital Budgeting (September 1, 1996). Available at SSRN: https://ssrn.com/abstract=1411611 or http://dx.doi.org/10.2139/ssrn.1411611

Evi Kaplanis

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Ian Anthony Cooper (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom
+44 171 262 5050 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
153
Abstract Views
1,169
rank
209,934
PlumX Metrics