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Firm value, investment and monetary policy

Marcelo Bianconi () and Joe Yoshino ()

International Journal of Accounting and Finance, 2015, vol. 5, issue 3, 262-289

Abstract: This paper presents empirical evidence supporting the view that US monetary conditions matter for firms in the global capital market in a recent period of great moderation. We show the effects of three risk measures, domestic bank interest rates spread, US bank interest rates spread, and US market price of interest rate risk on the value of firms and on the cross-listing decision of firms destined to three major markets in North America, Asia and Europe. The systematic risk comes from US monetary policy, while the local and US bank interest rates spreads contain their respective financial intermediation risk premiums. We use firm-level data in 29 countries of cross-listing origin over a six year period, from 2000 to 2005. We find consistent and robust evidence that the US federal funds rate signal-to-noise ratio risk measure or market price of interest rate risk in the Sharpe sense provides an important benchmark for firm value across the universe of publicly traded companies.

Keywords: Tobin q; cross-listing; risk premium; dynamic panel data; firm value; investment; monetary policy; USA; United States; risk measures; bank interest rates; interest rate spread; interest rate risk; federal funds; SNR; signal-to-noise ratio. (search for similar items in EconPapers)
Date: 2015
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Handle: RePEc:ids:intjaf:v:5:y:2015:i:3:p:262-289