Firm-Level Internationalisation and the Home Bias Puzzle
43 Pages Posted: 6 Jan 2011
Date Written: January 4, 2010
The extent to which internationalising MNEs create value, and the extent to which investors can reap the benefits of firm-level internationalisation remain controversial issues. Using a multi-country dataset with over 3 million observations, we classify 1,143 firms listed on the exchanges of the G7 countries according to the geographical spread of their sales and subsidiaries. We show that more internationalised firms provide greater diversification benefits. By investing in home-based internationalised firms, investors can ‘free ride’ the costs and risks associated with internationalisation at the level of the firm and exhibit home bias while availing of international diversification benefits.
Keywords: International diversification, home bias, mean variance spanning
JEL Classification: F21, F23, G11
Suggested Citation: Suggested Citation