It is the purpose of this article to draw attention to, and to make an analysis of, a type of international movement of securities which has, especially in recent years, acquired considerable importance and significance, but concerning which there has been to date virtually no systematic or extended discussion. I refer to what has been called, in various balance-of-payments studies, the “international movement of outstanding securities.”
International movements of securities may take a variety of forms. Historically one of the most important types, and certainly the one most commonly referred to in the literature, has been the flotation of new (or refunding) security issues on foreign (or domestic) capital markets, and their purchase by foreign investors. Associated with this has been the repurchase of these issues by their issuers, either governmental or corporate, for sinking-fund or redemption purposes. A further type of securities movement, also of great historical importance, has resulted from the acquisition of a controlling interest in foreign corporations or real estate, or from the establishment abroad by a parent company of branches or subsidiaries. This category is generally known as “direct investments.” In this case, however, international transfers of securities are not always involved; whether they are or not will depend upon the particular method of financing adopted. The same is true with respect to the resale of direct investments abroad to foreigners. The reasons for the establishment or acquisition of subsidiaries abroad are well known and need not be gone into here.