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International Diversification and Firm Value
Author(s) -
Garrod Neil,
Rees William
Publication year - 1998
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00236
Subject(s) - multinational corporation , valuation (finance) , diversification (marketing strategy) , business , valuation effects , enterprise value , economics , industrial organization , financial economics , microeconomics , accounting , finance , marketing
In this paper the impact of multinationalism is examined using a valuation model incorporating geographically segmented accounting information. The results indicate that multinational companies are more highly valued than their domestic counterparts and that the valuation difference lies in all their operations and not just their foreign operations. The value advantage of MNCs appears too large to be realistically explained by cost of capital reductions and would support either that high value firms become multinationals, rather than MNCs gaining valuation benefits from foreign investments, or a pricing fad. Preliminary results support the latter explanation.