Firm Value, Investment and Monetary Policy

34 Pages Posted: 4 Apr 2010 Last revised: 14 Feb 2011

See all articles by Marcelo Bianconi

Marcelo Bianconi

Tufts University - Department of Economics

Joe Akira Yoshino

University of São Paulo (USP) - Department of Economics

Date Written: November 15, 2010

Abstract

This paper presents empirical evidence supporting the view that US monetary conditions matter for firms in the global capital market. We show the effects of three risk measures, domestic bank interest rates spreads, US bank interest rates spread, and US market price of interest rate risk on the value of firms and on the cross listing decision of firms destined to three major markets in North America, Asia and Europe. The systematic risk comes from US monetary policy, while the local and US bank interest rates spreads contain their respective financial intermediation risk premiums. We use firm-level data in 29 countries of cross-listing origin over a six year period, from 2000 to 2005. We find consistent and robust evidence that the US federal funds rate signal-to-noise ratio risk measure or market price of interest rate risk in the Sharpe sense provides an important benchmark for firm value across the universe of publicly traded companies.

Keywords: firm value, nominal risk, cross-listing

JEL Classification: G00, E00

Suggested Citation

Bianconi, Marcelo and Yoshino, Joe Akira, Firm Value, Investment and Monetary Policy (November 15, 2010). Available at SSRN: https://ssrn.com/abstract=1583041 or http://dx.doi.org/10.2139/ssrn.1583041

Marcelo Bianconi (Contact Author)

Tufts University - Department of Economics ( email )

Medford, MA 02155
United States
617-627-2677 (Phone)

HOME PAGE: http://www.tufts.edu/~mbiancon

Joe Akira Yoshino

University of São Paulo (USP) - Department of Economics ( email )

Av. Prof. Luciano Gualberto 908
Sao Paulo SP, 05508-900
Brazil

HOME PAGE: http://www.usp.br/feaecon/perfil.php?i=10&u=57

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