 Risk premia in multi-national enterprisesICER Working Papers from ICER - International Centre for Economic Research Abstract: The CAPM implies that investors require equity risk premia when choosing risky investments and therefore demand higher returns to equity invested if higher risk is present. This should apply to investments in independent enterprises and multi-national enterprises alike. This hypothesis is investigated by analyzing a panel of 407,000 European firms for the years 1985 to 2010. When income is set in relation to invested capital, risk measured by earnings volatility emerges as the most important stable determinant of income. Results indicate that both MNEs and independent firms regularly account for risk as a major determinant of income when pricing international goods and services. Hence international taxation rules for multi-national enterprises should account for risk premia in transfer prices and resulting profits. Keywords: MNE; firm valuation; DCF; CAPM; risk premium; transfer pricing (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:icr:wpicer:08-2012 Access Statistics for this paper More papers in ICER Working Papers from ICER - International Centre for Economic Research Corso Unione Sovietica, 218bis - 10134 Torino - Italy. Contact information at EDIRC. |
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