Why Investors Value Multinationality

Randall Morck and Bernard Yeung

The Journal of Business, 1991, vol. 64, issue 2, 165-87

Abstract: The authors examine the value of multinationality to investors as reflected in firms' q ratios. The positive impact of research and development and advertising spending on a firm's q is enhanced by multinationality, but multinationality itself has no significant impact. This supports the internalization theory's prediction that intangible assets are necessary to justify direct foreign investment and, thus, a recent strand of trade literature that assumes multinational firms have intangible assets with public good properties. The authors' results do not support the hypothesis that investors value multinational firms as a means of diversifying their portfolios internationally. Copyright 1991 by University of Chicago Press.

Date: 1991
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