Why Investors Value Multinationality

Journal of Business. 64(2) 165-187, April 1991

University of Alberta School of Business Research Paper No. 2013-633

Posted: 8 Jun 2013

See all articles by Randall Morck

Randall Morck

University of Alberta - Department of Finance and Statistical Analysis; National Bureau of Economic Research (NBER); European Corporate Governence Institute; Asian Bureau of Finance and Economic Research

Bernard Yin Yeung

National University of Singapore - Business School

Date Written: April 9, 1990

Abstract

We examine the value of multinationality to investors as reflected in firms' q ratios. The positive impact of research and development and advertising spending on a firm's q is enhanced by multinationality, but multinationality itself has no significant impact. This supports the internalization theory's prediction that intangible assets are necessary to justify direct foreign investment and, thus, a recent strand of trade literature that assumes multinational firms have intangible assets with public good properties. Our results do not support the hypothesis that investors value multinational firms as a means of diversifying their portfolios internationally.

Suggested Citation

Morck, Randall K. and Yeung, Bernard Yin, Why Investors Value Multinationality (April 9, 1990). Journal of Business. 64(2) 165-187, April 1991; University of Alberta School of Business Research Paper No. 2013-633. Available at SSRN: https://ssrn.com/abstract=2276150

Randall K. Morck (Contact Author)

University of Alberta - Department of Finance and Statistical Analysis ( email )

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National Bureau of Economic Research (NBER)

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European Corporate Governence Institute ( email )

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Asian Bureau of Finance and Economic Research ( email )

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Bernard Yin Yeung

National University of Singapore - Business School ( email )

15 Kent Ridge Drive
BIZ 1 Level 6
Singapore, 119245
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)

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