Multinationality as real option facilitator — Illusion or reality?

Tom Aabo, Christos Pantzalis and Jung Chul Park

Journal of Corporate Finance, 2016, vol. 38, issue C, 1-17

Abstract: Previous literature provides multiple conflicting arguments on why and when multinationality should enhance or impede the value-relevance of firms' real options. We address this issue by examining whether the relationship between stock returns and changes in return volatility varies with multinationality. Our results indicate that multinationality does indeed act as a real option facilitator. Furthermore, we show that, consistent with the notion that there are limits to the operating flexibility associated with multinationality this benefit only accrues fully if the firm is not financially constrained and stabilizes at very high degrees of multinationality.

Keywords: International corporate expansion; Multinationality; Real options; Stock market valuation; Multiple regression analysis (search for similar items in EconPapers)
JEL-codes: F23 G32 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:38:y:2016:i:c:p:1-17

DOI: 10.1016/j.jcorpfin.2016.03.004

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