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With regard to the financial structure of a foreign subsidiary, there may be advantages other than a reduction in political risk that encourage MNCs

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With regard to the financial structure of a foreign subsidiary, there may be advantages other than a reduction in political risk that encourage MNCs to finance foreign subsidiaries with local money. Oborrowing from a well- established local bank can reduce political risk. All of the statements are correct an MNC that finances a foreign investment with home-country equity faces greater risk of expropriation than if it had financed the investment with at least some local debt or equity.

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