The international propagation of economic downturns through multinational companies: The real economy channel

Jan Bena, Serdar Dinc and Isil Erel

Journal of Financial Economics, 2022, vol. 146, issue 1, 277-304

Abstract: We study how non-financial multinational companies propagate economic declines from their subsidiaries located in countries experiencing an economic downturn to subsidiaries in countries not experiencing one. We find that investment is 18% lower in 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 country experiencing an economic downturn. The 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 the countries of the affected subsidiaries.

Keywords: Propagation; Contagion; Real economy channel; Investment; MNC; Transmission; Crisis (search for similar items in EconPapers)
JEL-codes: F23 G01 G31 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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Working Paper: The International Propagation of Economic Downturns Through Multinational Companies: The Real Economy Channel (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:146:y:2022:i:1:p:277-304

DOI: 10.1016/j.jfineco.2021.09.005

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