Corporate internationalization, subsidiary locations, and the cost of equity capital

Atanas Mihov () and Andy Naranjo
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Atanas Mihov: Federal Reserve Bank of Richmond
Andy Naranjo: University of Florida

Journal of International Business Studies, 2019, vol. 50, issue 9, No 6, 1544-1565

Abstract: Abstract This study examines the relationship between corporate internationalization and the cost of equity capital. We find that international diversification reduces the cost of equity. The diversification benefits are particularly strong during the 2008 financial crisis and for financially constrained firms. We also find that market-specific factors serve as important channels through which the corporate internationalization effects amplify or attenuate. Overall, our study provides support for theories that multinational companies perform valuable diversification functions to investors in a world with segmented and imperfect financial markets.

Keywords: corporate internationalization; cost of equity capital; financial constraints; subsidiary locations (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (21)

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DOI: 10.1057/s41267-018-00207-3

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