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The Corporate Finance of Multinational Firms

Author

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  • Erel, Isil

    (Ohio State U and European Corporate Governance Institute)

  • Jang, Yeejin

    (UNSW Sydney)

  • Weisbach, Michael S.

    (Ohio State U and European Corporate Governance Institute)

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.

Suggested Citation

  • Erel, Isil & Jang, Yeejin & Weisbach, Michael S., 2020. "The Corporate Finance of Multinational Firms," Working Paper Series 2020-01, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2020-01
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    References listed on IDEAS

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    3. Biguri, Kizkitza & Stahl, Jörg R., 2020. "Who Pays a Visit to Brussels? The Firm Value of Cross-Border Political Access to European Commissioners," LawFin Working Paper Series 9, Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin).
    4. Hennicke, Moritz & Blanga-Gubbay, Michael, 2023. "Betting on the Wrong Horse: Lobbying on TPP and the 2016 U.S. Presidential Election," OSF Preprints zcwsn, Center for Open Science.

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    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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