Economic policy uncertainty and multinational companies

Leming Lin, Atanas Mihov and Leandro Sanz

Review of Finance, 2025, vol. 29, issue 6, 1769-1807

Abstract: We study the impact and propagation of economic policy uncertainty (EPU) via subsidiary networks of US multinational corporations (MNCs). We find that increases in host-country EPU lead to significant decreases in MNC valuations. We document heterogeneous effects across key firm- and country-level dimensions such as intangible capital intensity, financial constraints, and country institutional quality. Higher EPU in host countries is associated with a decline in the growth of local MNC subsidiary-level assets and employment. We find no evidence of significant average spillover effects of host-country EPU on MNC subsidiaries in other countries and some evidence of negative spillover effects among vertically linked subsidiaries.

Keywords: multinational corporations; foreign direct investment; economic policy uncertainty; firm valuation; subsidiary networks (search for similar items in EconPapers)
JEL-codes: F21 F23 G32 G38 (search for similar items in EconPapers)
Date: 2025
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