The Valuation Effects of Multinational Firms

60 Pages Posted: 27 Mar 2008 Last revised: 14 Mar 2012

See all articles by Jason Sturgess

Jason Sturgess

Queen Mary University of London

Date Written: January 10, 2008


Using a unique sample of 212 UK multinational firms and 4,676 subsidiaries, I show that multinational firms attract, on average, a global diversification premium of approximately 16% compared with a country-industry matched portfolio of local non-multinational firms. I also show that the value premium is higher when the difference between UK and host country internal corporate governance is greater - on average better corporate governance practices explain roughly one-third of the value premium. This result suggests that multinational firms are compensated for exporting good corporate governance. Further, I find evidence that advocates multinational firms invest more in countries with weaker governance standards. At the subsidiary level, I find that multinational firms use internal capital markets to channel higher levels of investment into better investment opportunities. Finally, consistent with a value premium, I show that multinational firms channel investment into globally cheap assets.

Keywords: Multinational, Governance, International, Valuation, Diversification

JEL Classification: G30, G31, G32, G34

Suggested Citation

Sturgess, Jason, The Valuation Effects of Multinational Firms (January 10, 2008). Available at SSRN: or

Jason Sturgess (Contact Author)

Queen Mary University of London ( email )

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