The Government Attitude.

“The possibilities of conflict of interests between . . . and local interests on the basic and operating philosophy of the company, research policy, product line and product promotion, managements and personal policies, and dividend policies.”

Local participation is thus found where legislation forces it; where a subsidiary is acquired by buying interests in an established concern; where local people can supply access to marketing and operating know-how; or where public relations inĀ­dicate the advisability of selling subsidiary stock to nationals.

Evidently, the need to obtain funds is the least important of the reasons which may motivate companies to issue equity stock in foreign subsidiaries. Safarian’s study has confirmed this. He found that Canadian subsidiaries expressed:

“A preference for domestic financing beyond the original investment, if this is defined particularly to mean reliance on retained earnings. Where substantial long term capital, in particular is required, however, a number of firms revert to the parent rather than seek local resources. This probably reflects the relative ease and cheapness of funds from this source, particularly where the parent is generating surplus funds itself, or has easy access to low-cost sources of financing in more highly developed money markets.”