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Financial sector diversification and MNC valuation

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  • Kim, Chansog Francis
  • Margetis, Speros
  • Pantzalis, Chris
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    Abstract

    We extend the literature on MNC performance by examining the relationship between market valuation of MNCs and intangibles associated with financial expertise. We identify firms as having financial expertise if they have diversified their business in the financial sector. We argue that financial expertise enhances the ability of MNCs to internalize financial transactions and take advantage of financing and investment opportunities around the world. Therefore, it is a potentially significant source of market power. Our test results demonstrate that as the degree of multinationality increases market valuation is positively related with financial expertise even after we account for several other control factors. Our findings imply that MNCs with financial expertise can be viewed as possessing an additional intangible, which essentially is the financial equivalent of the traditionally examined intangible assets, such as technological "know-how," goodwill, and managerial expertise.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Multinational Financial Management.

    Volume (Year): 19 (2009)
    Issue (Month): 5 (December)
    Pages: 343-354

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    Handle: RePEc:eee:mulfin:v:19:y:2009:i:5:p:343-354

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    Web page: http://www.elsevier.com/locate/mulfin

    Related research

    Keywords: International finance Multinational firms Diversification Valuation Intangibles;

    References

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    Cited by:
    1. Saibal Kar & Chaitali Sinha, 2014. "Sectoral Technical Progress and Aggregate Skill Formation," Journal of Industry, Competition and Trade, Springer, vol. 14(2), pages 159-172, June.

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