Internationalization and the Evolution of Corporate Valuation

48 Pages Posted: 27 Dec 2004

See all articles by Juan Carlos Gozzi

Juan Carlos Gozzi

Board of Governors of the Federal Reserve

Ross Levine

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Sergio L. Schmukler

World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2006

Abstract

By documenting the evolution of Tobin's q before, during, and after firms internationalize, the authors provide evidence on the bonding, segmentation, and market timing theories of internationalization. Using new data on 9,096 firms across 74 countries over the period 1989-2000, they find that Tobin's q does not rise after internationalization, even relative to firms that do not internationalize. Instead, q rises significantly before internationalization and during the internationalization year. But then q falls sharply in the year after internationalization, quickly relinquishing the increases of the previous years. To account for these dynamics, the authors show that market capitalization rises before internationalization and remains high, while corporate assets increase during internationalization. The evidence supports models stressing that financial internationalization facilitates corporate expansion, but challenges models stressing that internationalization produces an enduring effect on q by bonding firms to a better corporate governance system.

Suggested Citation

Gozzi, Juan Carlos and Levine, Ross Eric and Schmukler, Sergio, Internationalization and the Evolution of Corporate Valuation (June 1, 2006). World Bank Policy Research Working Paper No. 3933. Available at SSRN: https://ssrn.com/abstract=633262

Juan Carlos Gozzi

Board of Governors of the Federal Reserve ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://www.federalreserve.gov/econresdata/juan-carlos-gozzi.htm

Ross Eric Levine

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sergio Schmukler (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN MC 3-301
Washington, DC 20433
United States
202-458-4167 (Phone)
202-522-3518 (Fax)

HOME PAGE: http://www.worldbank.org/en/about/people/s/sergio-schmukler

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