Emerging Market Outperformance: Publicly Traded Affiliates of Multinational Corporations

Abstract

Publicly traded emerging market affiliates of large multinational corporations (headquartered and mostly also listed in developed markets) have shown remarkably good performance over the past fourteen years. These affiliates combined high performance with lower volatility, outperforming both their local markets and the wider emerging markets, but not at the expense of significant greater downside volatility. Their performance during the financial crisis was particularly good, compared with both their local markets and the developed markets, and especially so in Asia. In our analysis, we suggest two main reasons for this outperformance: improved corporate governance and a stabilizing role of the parent companies. Both seem critical specifically in financial crises. These two features may give affiliates a clear comparative advantage over their local competitors, a benefit that should endure in the foreseeable future.

Keywords: emerging markets

JEL Classification: G10, G11, G15