Multinational Firms, Internal Capital Markets, and the Value of Global Diversification
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Volume
06
Pagination
1650004 - 1650004
Publisher
DOI
10.1142/s201013921650004x
Journal
Quarterly Journal of Finance
Issue
ISSN
2010-1392
Metadata
Show full item recordAbstract
<jats:p> Over the past 30 years, multinational firms’ investment grew four times faster than worldwide GDP. Yet the evidence on whether global diversification is valuable is inconclusive. This paper uses detailed foreign direct investment (FDI) data for 251 UK multinational firms and 4,676 subsidiaries for the period 1999–2005 to show that multinational firms exhibit, on average, a global diversification premium. I investigate this result and show that the premium is positively related to “winner-picking” transfers in internal capital markets, and more so for better-governed firms. The findings help explain why multinational firms’ investment and global diversification have significantly increased over the past three decades. </jats:p>
Authors
Sturgess, JCollections
- Finance [14]