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Ruanjai Suwantaradon's Research Page
Ph.D. Candidate, Economics, University of Minnesota |
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Dissertation Abstract Essay 1: Foreign Direct Investment and Foreign Portfolio Investment under Asymmetric Information This paper develops a model of international capital flows when there is asymmetric information between foreign investors and domestic managers. Direct investors have a direct influence on the management, thus overcoming agency and information problems. This information advantage, however, comes at the cost of having to acquire management expertise. The tradeoff between management costs and the costs of asymmetric information consequently determines the level and composition of a country’s international capital flows. Analyzing how this tradeoff changes with economic conditions in a country, the model can qualitatively capture the experiences of many crisis countries during the 1990s regarding the different behaviors of different forms of capital flows. Specifically, the model can capture the rise in FDI inflows despite the reversals of foreign portfolio investment inflows during deteriorating economic conditions which has been documented in this paper for the crises that involved no default by a country's government on its debts or no imposition of capital controls. Moreover, the model can also explain growing evidence on the impacts of good governance and institutional quality on the composition of a country's capital flows. In particular, the model predicts a lower level of capital inflows and a larger share of FDI in countries with weaker corporate governance. JEL Classifications: F21, F23, F34, F41, G14, G20, G32. Keywords: Foreign direct investment, international capital flows, asymmetric information, corporate governance. Essay 2: Financial Frictions and International Trade (Job Market Paper) This paper studies the effects of financial market imperfections on a firm’s operating and exporting decisions. I introduce financial frictions into a trade model with heterogeneous firms along the line of Melitz (2003). With the presence of financial constraints, even among a group of firms with the same productivity level, firms that are more financially constrained operate on a less efficient scale, and as a result, may no longer find operating and/or exporting profitable. In addition, financial frictions may create a distortion compared to the Melitz (2003) world since operation and export participation may be undertaken by those with better access to finance than those with higher productivity. Furthermore, financial frictions can have persistent effects on firms’ dynamics. Productive firms with very low starting net worth will never accumulate enough to overcome credit constraints and, therefore, will never start operating and, subsequently, never export even if they are very productive. Using data from the World Bank Enterprise Surveys for Brazil and Chile, I find evidence that supports the model’s predictions.
JEL Classifications: F10, F12, F14, F36, G20, G32. Keywords: financial frictions, borrowing constraints, firm heterogeneity, export participation
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