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Value Relevance of Multinationality: Evidence from K orean Firms
Author(s) -
Lee Sangno,
Kim Minho,
Davidson Wallace N.
Publication year - 2015
Publication title -
journal of international financial management and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.818
H-Index - 37
eISSN - 1467-646X
pISSN - 0954-1314
DOI - 10.1111/jifm.12025
Subject(s) - multinational corporation , internationalization , valuation (finance) , enterprise value , value (mathematics) , business , relevance (law) , economics , industrial organization , microeconomics , accounting , finance , political science , law , machine learning , computer science
The purpose of this study is to examine the valuation effects of multinationality in K orean firms and to identify the role of multinationality in internalization theory. We hypothesize that the market positively values the multinational activities of Korean firms, which are operating in a small open economy in which firms have strong motivations for internationalization. We use Ohlson's (1995, Contemporary Accounting Research, 11 , 661) value model and document the positive effect for multinational firms compared to domestic firms, as well as the positive effect of multinationality on firm value. These results are robust across studies, as indicated by T obin's q measure, as well as across years. We also hypothesize that multinationality mediates or moderates the relationship between intangibility and firm value that is proposed in internalization theory. We do not find supporting evidence for a mediated influence of intangibility through multinationality on firm value nor for a moderated influence of intangibility on firm value. We find that multinationality and intangibility directly and independently influence firm value, without any interference from each other. These results are also robust across studies, as indicated by T obin's q measure. Finally, we find that multinationality in K orean firms has never lost its importance, even during the global financial crisis in the year 2008.