Multinational Capital Budgeting and Finance Decisions

The financing and capital budgeting decisions of the multinational are distorted by factors including barriers to financial flows such as exchange controls, different national tax systems, political risks, international capital market segmentation, foreign exchange risks and the organizational structure of the multinational enterprise. An abundance of literature has been published in the quest to explain the theory of the multinational enterprise. The theory of the multinational has undergone a metamorphosis from risk reduction (Rugman 1979) and internalisation theory (Buckley and Casson 1976), where the multinational is viewed as quot;internalisingquot; imperfect factor and financial markets to an extent where net benefits to the multinational equate net costs, to Dunning's (1988) eclectic paradigm. The aim of this paper is to focus upon the importance that taxation and other factors play in the financing and investment decisions of multinationals