Multinational Firms, International Diversification, Value, and Governance

39 Pages Posted: 23 Sep 2009

See all articles by Jason Sturgess

Jason Sturgess

Queen Mary University of London

Date Written: September 16, 2009


This paper presents evidence that subsidiaries of multinational firms have higher valuations than locally matched firms. Using a unique sample of 251 UK multinational firms and 4,676 subsidiaries, the paper finds that multinational firms achieve, on average, an international diversification premium of 19%. Further, the value premium is increasing in the difference between the parent and host country's firm-level corporate governance, consistent with the hypothesis that multinational firms are compensated for exporting good governance. The results are robust to alternative governance mechanisms, and continue to obtain in regressions controlling for endogeneity and self-selection.

Keywords: Corporate governance, Firm valuation, Corporate diversification, Capital budgeting, Firm organization, Multinational firms

JEL Classification: G30, G31, G33, G34, G38, L20, L25

Suggested Citation

Sturgess, Jason, Multinational Firms, International Diversification, Value, and Governance (September 16, 2009). Available at SSRN: or

Jason Sturgess (Contact Author)

Queen Mary University of London ( email )

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