The Comovement of Returns and Investment Within the Multinational Firm

Mihir A. Desai and C. Fritz Foley

No 10785, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Can financial integration, particularly the cross-border investments of multinational firms, help explain the synchronization of business cycles? This paper presents evidence on the comovement of returns and investment within U.S. multinational firms to address this question. These firms constitute significant fractions of economic output and investment in most large economies, suggesting that they could create significant economic linkages. Aggregate measures of rates of return and investment rates of U.S. multinational firms located in different countries are highly correlated across countries. Firm-level regressions demonstrate that rates of return and investment rates of affiliates are highly correlated with the rates of return and investment of the affiliate's parent and other affiliates within the same parent system, controlling for country and industry factors. The evidence on these interrelationships and the importance of multinationals to local economies suggests that global firms may be an important channel for transmitting economic shocks. This evidence also sheds light on asset pricing puzzles related to the diversification benefits provided by multinational firms.

JEL-codes: F21 F23 F36 F42 G15 (search for similar items in EconPapers)
Date: 2004-09
Note: CF PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Published as The Comovement of Returns and Investment within the Multinational Firm , Mihir A. Desai, C. Fritz Foley. in NBER International Seminar on Macroeconomics 2004 , Clarida, Frankel, Giavazzi, and West. 2006

Downloads: (external link)
http://www.nber.org/papers/w10785.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:10785

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w10785

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().