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Hysteresis and the Value of the U.S. Multinational Corporation

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  • Christophe, Stephen E
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    Abstract

    This article examines the value of international operations to the U.S. multinational corporation during a period of exchange rate volatility and uncertainty. Rather than enhancing firm value, international operations during the 1980s are found to be associated with decreased firm value, with the greatest decreases occurring when the dollar was strongest. This evidence is consistent with recent models that predict a connection between sunk costs and hysteretic pricing behavior in foreign markets. Copyright 1997 by University of Chicago Press.

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    Bibliographic Info

    Article provided by University of Chicago Press in its journal Journal of Business.

    Volume (Year): 70 (1997)
    Issue (Month): 3 (July)
    Pages: 435-62

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    Handle: RePEc:ucp:jnlbus:v:70:y:1997:i:3:p:435-62

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    Web page: http://www.journals.uchicago.edu/JB/

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    Cited by:
    1. Berry, Heather & Sakakibara, Mariko, 2008. "Resource accumulation and overseas expansion by Japanese multinationals," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 65(2), pages 277-302, February.
    2. Christophe, Stephen E. & Lee, Hun, 2005. "What matters about internationalization: a market-based assessment," Journal of Business Research, Elsevier, Elsevier, vol. 58(5), pages 636-643, May.
    3. Pablo, Eduardo, 2013. "Cross-border diversification through M&As in Latin America," Journal of Business Research, Elsevier, Elsevier, vol. 66(3), pages 425-430.
    4. Akiomi Yutaka Horiba & Kazuo Yoshida, 2003. "Determinants Of The Initial Decisions By Japanese Firmsto Undertake Foreign Direct Investment," Discussion Papers in Economics and Business 03-09, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    5. Eckert, Stefan & Dittfeld, Marcus & Muche, Thomas & Rässler, Susanne, 2010. "Does multinationality lead to value enhancement? An empirical examination of publicly listed corporations from Germany," International Business Review, Elsevier, Elsevier, vol. 19(6), pages 562-574, December.
    6. Gabriel Natividad & Olav Sorenson, 2011. "Spread Too Thin: Uncertainty Shocks and Diseconomies of Scope," Working Papers, NET Institute 11-04, NET Institute.
    7. Axarloglou, Kostas & Kouvelis, Panos, 2007. "Hysteresis in adjusting the ownership structure of foreign subsidiaries," International Business Review, Elsevier, Elsevier, vol. 16(4), pages 494-506, August.
    8. Sangcheol Song, 2014. "Entry mode irreversibility, host market uncertainty, and foreign subsidiary exits," Asia Pacific Journal of Management, Springer, Springer, vol. 31(2), pages 455-471, June.
    9. Juul Andersen, Torben, 2005. "The performance effect of computer-mediated communication and decentralized strategic decision making," Journal of Business Research, Elsevier, Elsevier, vol. 58(8), pages 1059-1067, August.
    10. Nelson, James M. & Moffitt, Jacquelyn Sue & Affleck-Graves, John, 2005. "The impact of hedging on the market value of equity," Journal of Corporate Finance, Elsevier, Elsevier, vol. 11(5), pages 851-881, October.
    11. Fauver, Larry & Naranjo, Andy, 2010. "Derivative usage and firm value: The influence of agency costs and monitoring problems," Journal of Corporate Finance, Elsevier, Elsevier, vol. 16(5), pages 719-735, December.
    12. Dos Santos, Marcelo B. & Errunza, Vihang R. & Miller, Darius P., 2008. "Does corporate international diversification destroy value? Evidence from cross-border mergers and acquisitions," Journal of Banking & Finance, Elsevier, Elsevier, vol. 32(12), pages 2716-2724, December.
    13. Chari, Murali D.R. & Devaraj, Sarv & David, Parthiban, 2007. "International diversification and firm performance: Role of information technology investments," Journal of World Business, Elsevier, Elsevier, vol. 42(2), pages 184-197, June.
    14. Reid W. Click & Paul Harrison, 2000. "Does multinationality matter? Evidence of value destruction in U.S. multinational corporations," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2000-21, Board of Governors of the Federal Reserve System (U.S.).
    15. Rugman, Alan M. & Oh, Chang Hoon, 2010. "Does the regional nature of multinationals affect the multinationality and performance relationship?," International Business Review, Elsevier, Elsevier, vol. 19(5), pages 479-488, October.

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