Delve: How Barriers to Foreign Investments Affect Risk-Taking in International Markets, with Francesca Carrieri
What regulations are at play when financial institutions, hedge funds, mutual fund managers, and others invest in stocks and businesses in another country—and who do those regulations ultimately benefit? Despite protecting both foreign investors and countries’ domestic markets, regulatory constraints still present certain barriers to foreign investment, especially in times of market stress, inflation, and increased interest rates. What level of risk will foreign investors take today in the name of diversification of their portfolios?
On the Delve podcast, Desautels Faculty of Management Professor Francesca Carrieri addresses the dynamics of global market integration before and after the 2008 financial crisis, examining the details of foreign investment and current barriers to it. Carrieri and her co-researchers show how regulatory constraints on foreign investors’ use of leverage can act as an international investment barrier.
“In periods of stress, markets become more segmented and it becomes harder for countries around the world to share risks,” says Carrieri. “When credit becomes scarce, one of the first things that becomes a reason to worry for investors is the fact that they have foreign stocks in their portfolio—and the fact that they might pull back from investment in these foreign stocks because of certain rules. What we can do is strengthen the financial system overall, but also make sure that, under certain conditions, institutional investors have the liquidity necessary to strengthen their underlying positions.”
For more insights, read the article and listen to the full interview with Professor Francesca Carrieri on the .
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Founded in 2019, Delve is the official thought leadership publication of Ď㽶ĘÓƵ’s Desautels Faculty of Management. Under the direction of Professor Saku Mantere, inaugural Editor-in-Chief, Delve features the latest in management thinking that stretches perspectives, sparks new ideas, and brings clarity to decision-makers at all levels and across sectors.