Internationalization and the Evolution of Corporate Valuation

49 Pages Posted: 1 Feb 2005 Last revised: 16 Aug 2010

See all articles by Ross Levine

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: January 2005

Abstract

By documenting the evolution of Tobin's "q" before, during, and after firms internationalize, this paper provides 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, we find that Tobin's "q" does not rise after internationalization, even relative to firms that do not internationalize. Instead, "q" rises significantly one year before internationalization and during the internationalization year. But, then "q" falls sharply in the year after internationalization, relinquishing the increases of the previous two years. To account for these dynamics, we show that market capitalization rises one year before internationalization and remains high, while corporate assets increase during internationalization. The evidence supports models stressing that 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

Levine, Ross Eric and Schmukler, Sergio, Internationalization and the Evolution of Corporate Valuation (January 2005). NBER Working Paper No. w11023. Available at SSRN: https://ssrn.com/abstract=645265

Ross Eric Levine (Contact Author)

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

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National Bureau of Economic Research (NBER)

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Sergio Schmukler

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

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202-458-4167 (Phone)
202-522-3518 (Fax)

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

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