Multinational Ownership and Subsidiary Investment
AbstractThis paper examines how foreign ownership affects the investment decisions of subsidiary firms using a new dataset of listed-parent - listed-subsidiary pairs.� We find that improvements in the investment opportunities of parent firms have a negative effect on the investment of their subsidiaries, after controlling for the investment opportunities of the subsidiary, which can be independently observed.� This provides evidence of internal capital markets in multinationals that reallocate funds towards units with better investment opportunities.� We also find that the negative effect of the parent's investment opportunities on subsidiary investment is greatest where the relationship is more arms-length, i.e. where parents have modest ownership stakes, are distant from their subsidiaries or when subsidiaries - as well as parents - operate in well developed financial markets.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 2008fe05.
Date of creation: 01 Jan 2008
Date of revision:
Investment; Internal Capital Markets; Foreign Ownership;
Other versions of this item:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
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- BEUSELINCK, Christof & DELOOF, Marc & VANSTRAELEN, Ann, 2011. "Corporate governance and cash policies of multinational corporations," Working Papers 2011020, University of Antwerp, Faculty of Applied Economics.
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