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Multinational Firms and the International Transmission of Crises: The Real Economy Channel

Author

Listed:
  • Bena, Jan

    (University of British Columbia)

  • Dinc, Serdar

    (Rutgers University)

  • Erel, Isil

    (Ohio State University)

Abstract

We study how multinational companies transmit negative shocks from their subsidiaries located in crisis countries to subsidiaries in non-crisis countries. We find that investment is 18% lower in non-crisis subsidiaries of these parents relative to the same-industry, same-country subsidiaries of parents that are headquartered in the same parent country but do not have a subsidiary in a crisis country. Employment growth rate in the affected subsidiaries is zero or negative while it is 1.4% in the subsidiaries of unaffected parents. The aggregate industry-level sales and employment are also negatively impacted in countries of the affected subsidiaries.

Suggested Citation

  • Bena, Jan & Dinc, Serdar & Erel, Isil, 2017. "Multinational Firms and the International Transmission of Crises: The Real Economy Channel," Working Paper Series 2017-11, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    • Handle: RePEc:ecl:ohidic:2017-11
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    Cited by:

    1. Themann, Michael, 2021. "At boiling point: Temperature shocks in global business groups," Ruhr Economic Papers 905, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G01 - Financial Economics - - General - - - Financial Crises
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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