The Corporate Finance of Multinational Firms

Isil Erel, Yeejin Jang and Michael Weisbach
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Isil Erel: Ohio State U and European Corporate Governance Institute
Yeejin Jang: UNSW Sydney

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: An increasing fraction of firms worldwide operate in multiple countries. We study the costs and benefits of being multinational in firms' corporate financial decisions and survey the related academic evidence. We document that, among U.S. publicly traded firms, the prevalence of multinationals is approximately the same as domestic firms, using classification schemes relying on both income-based and a sales-based metrics. Outside the U.S., the fraction is lower but has been growing. Multinational firms are exposed to additional risks beyond those facing domestic firms coming from political factors and exchange rates. However, they are likely to benefit from diversification of cash flows and flexibility in capital sources. We show that multinational firms, indeed, have a better access to foreign capital markets and a lower cost of debt than otherwise identical domestic firms, but the evidence on the cost of equity is mixed.

JEL-codes: F23 F65 G30 G31 G32 (search for similar items in EconPapers)
Date: 2020-02
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Citations: View citations in EconPapers (6)

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https://ssrn.com/abstract=3535761

Related works:
Working Paper: The Corporate Finance of Multinational Firms (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2020-01

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