Direct investment

Investment in which a resident of one country obtains a lasting interest in, and a degree of influence over, the management of a business enterprise  in another country. In the United States, the criterion used to distinguish direct investment from other types of investment is ownership of at least 10 percent of the voting securities of an incorporated business enterprise or an equivalent ownership interest of an unincorporated business enterprise. Related terms: foreign direct investment in the United States, U.S. direct investment abroad.

 Equity capital increases and decreases. Equity capital increases consist of payments by parent companies to third parties abroad for the purchase of capital stock or other equity interests when they acquire an existing business, payments made to acquire additional ownership interests in their affiliates, and capital contributions to their affiliates. Equity capital decreases are funds that parent companies receive (except from distributions of earnings) when they reduce their equity interest in their affiliates. Related terms: direct investment capital flows.

 Loans, trade credits, and other transactions in intercompany account payables or receivables between U.S. parent companies and their foreign affiliates, or between U.S. affiliates and their foreign parents or other members of their foreign parent groups.

A parent company’s claim on the current-period undistributed after-tax earnings of its affiliates. Related terms: direct investment capital flows.