The International Transmission of Negative Shocks Through Multinational Companies: The Real Economy Channel

Fisher College of Business Working Paper No. 2017-03-011

Charles A. Dice Center Working Paper No. 2017-11

82 Pages Posted: 3 May 2017 Last revised: 15 Feb 2019

See all articles by Jan Bena

Jan Bena

University of British Columbia - Sauder School of Business

Serdar Dinc

Rutgers University

Isil Erel

Ohio State University (OSU) - Department of Finance

Date Written: February 12, 2019

Abstract

We study how non-financial multinational companies transmit negative shocks from their subsidiaries located in countries experiencing a negative shock to subsidiaries in countries not experiencing one. We find that investment is 18% lower in subsidiaries of these parents relative to the same-industry, same-country subsidiaries of parents that are headquartered in the same parent country but do not have a subsidiary in a country experiencing a negative shock. Employment growth rate in the affected subsidiaries is zero or negative while it is 1.4% in the subsidiaries of unaffected parents. The aggregate industry-level sales and employment are also negatively impacted in the countries of the affected subsidiaries.

Keywords: Multinational Companies, MNC, International Contagion, International Comovement, International Spillovers, International Contagion, Transmission of Shocks

JEL Classification: G01, G30, G31, F23, F42

Suggested Citation

Bena, Jan and Dinc, Serdar and Erel, Isil, The International Transmission of Negative Shocks Through Multinational Companies: The Real Economy Channel (February 12, 2019). Fisher College of Business Working Paper No. 2017-03-011. Available at SSRN: https://ssrn.com/abstract=2962389 or http://dx.doi.org/10.2139/ssrn.2962389

Jan Bena

University of British Columbia - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
+1 604 822 8490 (Phone)

HOME PAGE: http://www.janbena.com

Serdar Dinc

Rutgers University ( email )

111 Washington Avenue
Newark, NJ 07102
United States

HOME PAGE: http://serdardinc.com

Isil Erel (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

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