The Corporate Finance of Multinational Firms / Isil Erel, Yeejin Jang, Michael S. Weisbach.

Format:

Book

Author/Creator:

Erel, Isil.

Contributor:

National Bureau of Economic Research.

Jang, Yeejin.

Weisbach, Michael S.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26762.

NBER working paper series no. w26762

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

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.

Notes:

Print version record

February 2020.