Capital markets and the market structure of foreign investments

Contrary to the long-received theory of FDI, interest rates or rates of return can motivate foreign direct investment (FDI) in concert with the benefits of direct ownership. Thus, access to investor capital and capital markets is a vital component of the multinational’s competitive market structure. Moreover, multinationals can use their superior financial capacity as a competitive advantage in exploiting FDI opportunities in dynamic markets. They can also mitigate higher levels of foreign business risks under dynamic conditions by shifting more financial risk to creditors in the host economy. Furthermore, the investor’s expectation of foreign business risk necessarily commands a risk premium for exposing their equity to foreign market risk. Multinationals can modify the profit maximization strategy of their foreign subsidiaries to maximize growth or profits to generate this risk premium. In this context, we investigate how foreign subsidiaries manage their capital funding, business risk, and profit strategies with a diverse sample of 8,000 matched parents and foreign subsidiary accounts from multiple industries in 38 countries.We find that interest rates, asset prices, and expectations in capital markets have a significant effect on the capital movements of foreign subsidiaries. We also find that foreign subsidiaries mitigate their exposure to foreign business risk by modifying their capital structure and debt maturity. Further, we show how the operating strategy of foreign subsidiaries affects their preference for growth or profit maximization. We further show that superior shareholder value, which is a vital link for access to capital for funding foreign expansion in open market economies, is achieved through maintaining stability in the rate of growth and good asset utilization.

Creep crack growth in cast steam turbine casing steels

The creep rupture properties of cast ½Cr½Mo¼V and 1Cr1Mo¼V alloy steel used in the manufacture of power station steam generating plant. have been investigated. The effects of constraint and geometry on the creep rupture properties are also considered. The validity of various criteria controlling macroscopic creep crack growth in cast CrMoV alloys has been examined. It is found that neither the stress intensity factor nor reference stress correlate satisfactorily the creep crack growth rates at the test temperature of 550°C. Certain minimum displacements must be achieved for crack initiation and propagation. It is found that this displacement as measured by crack opening displacement or crack aspect ratio, is the same in both compact tension and centre-cracked panel geometries, is invariant with crack length and decreases with increasing constraint. The effect of constraint on creep crack growth rate in the two geometries is less conclusive. A new model describing creep crack growth in cast CrMoV alloy steels has been developed. The model is based on the results from a numerical finite element creep analysis of the relaxation and redistribution of stress ahead of an incubating creep crack . It is found that macroscopic creep crack growth in a material undergoing either plane stress or plane strain deformation can be described by a fracture stress which is based on the Von Mises equivalent stress. It has been shown that this model is capable of rationalising all of the experimental crack velocity data from the cast CrMoV alloys. The resultant degree of data correlation is far superior to that obtained when using the stress intensity factor or reference stress. A cumulative damage creep fracture model based upon the results from the numerical analysis has been developed. It is found that the model is capable of predicting the behaviour of propagating creep cracks in cast CrMoV alloys from smooth bar creep rupture data.