earticle

영어

As the globalism that pursues free trade and the regionalism that promotes regional interest are witnessed throughout the world, today`s international political order is undergoing rapid internationalization. Korea is responding to this international trend with more and more korean companies taking interest in Foreign Direct Investment(FDI) after the first foreign investment by a korean company was made in 1968 by korea Nambang Developmen Corporation to Indonesia. One of the major differences between a multi-national company and domestic-oriented company is that the multi-national company has the option of taking advantage of the unstability in international product & capital market. Since the information on FDI is something that only multinational companies can have, it can increase the values of multi-national companies` stock value. According to Doucas and Travlos, when American companies make inroad into economically-backward regions to acquire a company in the region, the major stockholders of the American companies can have significant abnormal returns before or after the announcement day. However, FDI of Korean companies can be regarded as their inevitable survival strategy in this period when they are faced with mature domestic market, fierce competition, limits in technology development capability and the reluctance of advanced countries to transfer their technology to Korea. The purpose of this study is to identify the effect that FDI announcement by domestic companies can have on their stockholders and to review the FDI strategies of Korean companies. The sample used in this study is based on the stock profit rates of fifty-two Korean companies that have made FDI in 1990-1993 period. Following are the results of the analysis : First, based on the comprehensive sample, it can be concluded that FDI announcement by Korean companies had negative effects on their stockholders. The average abnormal returns on the announcement day of -0.012%(Z=0.1911)were not statistically significant; while the cumulative abnormal returns of -2.4% from t=23 to t=1 was statistically significant at 10% level. Secondly, Korean companies that made FDI were divided into marginal companies and growing companies based on their sense of urgency for investing overseas. Based on the sample for each group of companies, analysis of the effects of announcement of FDI information on major stockholders was carried out. In the case of marginal company, abnormal return rate was significantly negative(-) for the major stockholder while the rate was close to neutral in the growing companies. Therefore, comprehensive sample and the FDI information of the marginal companies both showed that the effects on major stockholders were significantly negative statistically. It has also been identified that the FDI information of the growing companies did not have any more impact than normal returns on their major stockholders. Therefore, it can be concluded that FDI by Korean companies should be understood as a survival strategy to continue their existence in domestic & overseas markets in this tumultuous period and not necessarily as a strategy to pursue abnormal returns through internationalization