Internationalization and the Evolution of Corporate Valuation

Ross Levine (rosslevine@stanford.edu) and Sergio Schmukler

No 11023, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: By documenting the evolution of Tobin's "q" before, during, and after firms internationalize, this paper provides evidence on the bonding, segmentation, and market timing theories of internationalization. Using new data on 9,096 firms across 74 countries over the period 1989-2000, we find that Tobin's "q" does not rise after internationalization, even relative to firms that do not internationalize. Instead, "q" rises significantly one year before internationalization and during the internationalization year. But, then "q" falls sharply in the year after internationalization, relinquishing the increases of the previous two years. To account for these dynamics, we show that market capitalization rises one year before internationalization and remains high, while corporate assets increase during internationalization. The evidence supports models stressing that internationalization facilitates corporate expansion, but challenges models stressing that internationalization produces an enduring effect on "q" by bonding firms to a better corporate governance system.

JEL-codes: F20 F36 G15 (search for similar items in EconPapers)
Date: 2005-01
New Economics Papers: this item is included in nep-acc, nep-bec and nep-fin
Note: CF IFM AP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published as Gozzi, Juan Carlos & Levine, Ross & Schmukler, Sergio L., 2008. "Internationalization and the evolution of corporate valuation," Journal of Financial Economics, Elsevier, vol. 88(3), pages 607-632, June.

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Journal Article: Internationalization and the evolution of corporate valuation (2008)
Working Paper: Internationalization and the evolution of corporate valuation (2006)
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