Multinational Firms and the International Transmission of Crises: The Real Economy Channel

Jan Bena, Serdar Dinc and Isil Erel
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Serdar Dinc: Rutgers University
Isil Erel: Ohio State University

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: We study how multinational companies transmit negative shocks from their subsidiaries located in crisis countries to subsidiaries in non-crisis countries. We find that investment is 18% lower in non-crisis subsidiaries of these parents relative to the same-industry, same-country subsidiaries of parents that are headquartered in the same parent country but do not have a subsidiary in a crisis country. Employment growth rate in the affected subsidiaries is zero or negative while it is 1.4% in the subsidiaries of unaffected parents. The aggregate industry-level sales and employment are also negatively impacted in countries of the affected subsidiaries.

JEL-codes: F23 F42 G01 G30 G31 (search for similar items in EconPapers)
Date: 2017-03
New Economics Papers: this item is included in nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2017-11

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