Multinational Firms and Plant Divestiture

35 Pages Posted: 21 Oct 2015

See all articles by Ayça Tekin-Koru

Ayça Tekin-Koru

TED University

Ayça Tekin‐Koru

Research Institute of Industrial Economics (IFN)

Andreas Waldkirch

Colby College - Department of Economics

Date Written: November 2015

Abstract

Multinational firms not only make acquisitions, but also frequently divest affiliates. Affiliate divestiture is the result of many factors, some internal and some external to the firm. Using detailed confidential survey data of Swedish multinationals, we are able to examine divestiture decisions within the context of the world‐wide affiliate network of the firm. In contrast, most existing studies of multinational exit focus on one country only. A model of mergers and acquisitions with financing constraints generates predictions regarding the correlation between affiliate size and the decision to sell. Consistent with this theory, we find that larger affiliates are more likely to be divested, but an increase in relative size of an affiliate reduces the probability of divestiture. Additional network characteristics, the presence of other affiliates nearby and sales of affiliates elsewhere, are also positively correlated with divestiture. We find no support for the notion of footloose multinationals.

Suggested Citation

Tekin-Koru, Ayca and Tekin‐Koru, Ayça and Waldkirch, Andreas, Multinational Firms and Plant Divestiture (November 2015). Review of International Economics, Vol. 23, Issue 5, pp. 811-845, 2015. Available at SSRN: https://ssrn.com/abstract=2676979 or http://dx.doi.org/10.1111/roie.12199

Ayca Tekin-Koru (Contact Author)

TED University ( email )

Department of Business Administration
Ziya Gokalp Bulvari No: 48
Ankara, 06420
Turkey
+90 312 535 0034 (Phone)

Ayça Tekin‐Koru

Research Institute of Industrial Economics (IFN)

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Andreas Waldkirch

Colby College - Department of Economics ( email )

Waterville, ME 04901
United States
207-859-5244 (Phone)
207-859-5229 (Fax)

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