International Trade, Multinational Activity, and Corporate Finance

Posted: 7 Aug 2015

See all articles by C. Fritz Foley

C. Fritz Foley

Harvard Business School; National Bureau of Economic Research (NBER)

Kalina Manova

University College London - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: August 2015

Abstract

An emerging new literature brings unique ideas from corporate finance to the study of international trade and investment. Insights about differences in the development of financial institutions across countries, the role of financial constraints, and the use of internal capital markets are proving central in understanding international economics. The ability to access financial capital to pay fixed and variable costs affects choices firms make regarding export entry and operations and, as a consequence, influences aggregate trade patterns. Financial frictions and the use of internal capital markets shape decisions that multinationals make regarding production locations, integration, and corporate governance. This article surveys this recent research with the goal of highlighting the main themes it explores, the key results it establishes, and the leading open questions it raises.

Suggested Citation

Foley, C. Fritz and Manova, Kalina B., International Trade, Multinational Activity, and Corporate Finance (August 2015). Annual Review of Economics, Vol. 7, pp. 119-146, 2015. Available at SSRN: https://ssrn.com/abstract=2640074 or http://dx.doi.org/10.1146/annurev-economics-080614-115453

C. Fritz Foley (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
617-495-6375 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kalina B. Manova

University College London - Department of Economics ( email )

Drayton House, 30 Gordon Street
30 Gordon Street
London, WC1H 0AX
United Kingdom

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