Systematic Risk of the Multinational Corporation

David Reeb, Chuck C Y Kwok and H Young Baek
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Chuck C Y Kwok: University of South Carolina
H Young Baek: University of South Carolina

Journal of International Business Studies, 1998, vol. 29, issue 2, 263-279

Abstract: Previous literature suggests that multinational firms decrease their systematic risk owing to the diversification benefit of having cash flows in different countries. It is posited in this article that multinational firms may increase their systematic risk owing to an increase in the standard deviation of cash flows from internationalization, with offsets the lower correlation associated with diversification. Evidence of a significant positive relationship between the level of systematic risk in a firm and the degree of that firm's internationalization is presented. This analysis is consistent with observed practitioner usage of higher discount rates in evaluating international projects.© 1998 JIBS. Journal of International Business Studies (1998) 29, 263–279

Date: 1998
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