Property Rights Institutions, Foreign Investment, and the Valuation of Multinational Firms
53 Pages Posted: 18 Sep 2015 Last revised: 22 Apr 2019
Date Written: December 7, 2017
We study the effect of property rights institutions in host countries, the institutions protecting investors from expropriation by host country agents, on the geographic structure and valuation of U.S. multinational corporations (MNCs). We provide firm-level evidence that better property rights attract investment from MNCs. We disentangle the effects of the Stulz (2005) "twin agency problems" in the context of foreign direct investment, and show that our results are not driven by legal institutions protecting investors from expropriation by corporate insiders. Further, we show that changes in the quality of property rights in locations where MNCs operate have material impact on MNCs' valuations.
Keywords: Multinational Corporations; Foreign Direct Investment; Country Governance; Property Rights Institutions; Investor Protection; Firm Valuation
JEL Classification: G30, G34, 38, F30
Suggested Citation: Suggested Citation