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Risk Management and Diversification Strategy to Evaluate MNE Systematic Risk in Emerging Economy

Author

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  • Yuang Shiang CHAO

    (Department of Finance and graduate school of financial management, Nan Hua University, Taiwan)

Abstract

This study mainly assesses the joint effects of diversification configuration on firm performance and systematic risk. We selected 269 stock public-listed firms to examine the separate and their joint effects on systematic risk. From our findings, high diversification configuration significantly leads to high systematic risk. However, systematic risk goes worse at high levels of country and region diversification. The findings led to the conclusion that the effect through “China involvement” which had co-opted and caught the strategic resources from the regions to focus its FDI policy objectives especially expands the country scope. It’s important to consider how to maintain the competitiveness of their ventures in China to expand the markets overseas. The contribution is to connect the impact factors to analyze which model is beneficial for MNEs to evaluate the risk management in emerging economy. The results point out MNEs should use resource-based advantages through moderate diversification strategy and middle China involvement strategy to access to better risk management and reduce systematic risk.

Suggested Citation

  • Yuang Shiang CHAO, 2018. "Risk Management and Diversification Strategy to Evaluate MNE Systematic Risk in Emerging Economy," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 131-152, September.
    • Handle: RePEc:rjr:romjef:v::y:2018:i:3:p:131-152
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    References listed on IDEAS

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    More about this item

    Keywords

    joint effects; diversification; systematic risk; China involvement (CI); multinational enterprises (MNEs); emerging economy; risk management;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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