Measuring the Diversification Benefits of Investing in Highly Internationalised Firms
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Journal ArticleDate:
2019Access:
openAccessCitation:
Berrill, J., Kearney, C. and O'Hagan-Luff, M., Measuring the Diversification Benefits of Investing in Highly Internationalised Firms, International Business Review, 28, 4, 2019, 672 - 684Abstract:
A vast literature exists investigating if Multinational Companies (MNCs) provide indirect international exposure to investors. These studies produce mixed results. Unlike previous studies, we distinguish between various types of MNCs, in particular firms that are consistently international versus firms that are in the process of internationalising. We provide a unique longitudinal dataset of firm-level multinationality of 396 Russell 1000 firms between 1996 and 2010, and estimate the diversification benefits of investing in these firms using mean variance spanning and Sharpe ratio tests. We find that the most consistently international firms provide the greatest diversification benefits. Rapidly internationalising firms provide little benefit, suggesting that the costs of rapid firm-level internationalisation are substantial. This distinction between firms at differing stages of internationalisation adds to the debate on the benefits of investing in MNCs and provides a possible explanation to the conflicting findings in the literature.
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http://people.tcd.ie/ohaganmhttp://people.tcd.ie/jberril
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PUBLISHED
Author: Berrill, Jenny; O'Hagan Luff, Martha
Type of material:
Journal ArticleSeries/Report no:
International Business Review;28;
4;
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Full text availableKeywords:
Rapidly internationalising firms, Firm-level internationalisation, Mean-variance spanning, Multinational companies (MNCs)Subject (TCD):
International IntegrationDOI:
https://doi.org/10.1016/j.ibusrev.2019.01.005https://doi.org/10.21314/JOIS.2019.113
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