AIB 2012 Conference Proceedings - Academy of International ...

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of MNEs by adding two moderators that affect directions of exports for firms located in transcontinental
countries. (For more information, please contact: Alexey V. Semenov, Saint Louis University, USA:
asemenov@slu.edu)
Determinants for Political Risk Insurance of Direct Investments in Emerging Markets
Omar Penna Moreira Filho, Fundação Getúlio Vargas
Richard Saito, Fundação Getúlio Vargas
This paper analyzes the main determinants for investors to enter into political risk insurance (PRI) for its direct
investments as well as the rationale for exiting PRI by not renewing its policies. This paper contributes to the
existing PRI literature by investigating how major drivers for PRI, such as, political risks, economic risks,
sponsor capacity, instrument used to invest, investment horizon) determine PRI schemes by using a non-linear
binary response variable model. A unique database of the Multilateral Investment Guarantee Agency (MIGA)
from 1990 to 2010 containing information on 693 investments including its coverage for: convertibility risk
insurance, expropriation risk insurance, war and civil disturbance risks. However, we find that 47% do not
remain active until the original contracted tenor. In addition, financial institutions as guarantee holders use
more debt proportionally more than equity as an investment instrument, and are largely insured within the EU.
On the other hand, BRICs investors tend to mainly cover its investments in infrastructure. Empirical findings
include that an increase in breach of contract and civil unrest risks is fully correlated with the renewal of the
insurance policies as well as the increased risk perception of the host country. The policies seem to have a bring
a unique combination of coverage: for instance, breach of contract and transfer risk are directly influenced by
the breach of contract risk. Another preferred combination includes transfer risk and breach of contract are by
civil unrest risks. (For more information, please contact: Omar Penna Moreira Filho, Fundação Getúlio Vargas,
Brazil: opmf@terra.com.br)
Wal-mart's Dream of Conquering 'Cape to Cairo' Hits Snag in South Africa
Gladys Torres Baumgarten, Ramapo College of NJ
Reaction to FDI announcements – either by government officials or the public – may set the tone for the
ultimate success (or failure) of a new market entry. This paper looks at the institutional environment in a
developing market and investigates the polarizing voices that may arise when one of the world's largest
[retailing] MNEs (U.S.-based, Wal-mart) announces its intent to enter a developing market (South Africa). The
paper draws implications for [retailing] MNEs intent on entering developing markets and also identifies policy
implications for developing host countries when facing pressures to protect domestic interests, while striving to
attract FDI. (For more information, please contact: Gladys Torres Baumgarten, Ramapo College of NJ, USA:
torresbaumgarten@gmail.com)
Session: 1.3.12 - Interactive
Track: 10 - Economics, Finance and Accounting
Financial Liberalization
Presented On: July 1, 2012 - 13:00-14:15
Chair: Amir Shoham, Temple
Sovereign Credit Default Swaps and Emerging Equity Markets
Mitchell Ratner, Rider University
Chih-Chieh Chiu, Rider University
AIB 2012 Conference Proceedings
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