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International Trade, Multinational Activity, and Corporate Finance

Author

Listed:
  • C. Fritz Foley

    (Finance Unit, Harvard Business School, Boston, Massachusetts 02163
    National Bureau of Economic Research, Cambridge, Massachusetts 02138)

  • Kalina Manova

    (Department of Economics, Stanford University, Stanford, California 94305
    National Bureau of Economic Research, Cambridge, Massachusetts 02138)

Abstract

An emerging new literature brings unique ideas from corporate finance to the study of international trade and investment. Insights about differences in the development of financial institutions across countries, the role of financial constraints, and the use of internal capital markets are proving central in understanding international economics. The ability to access financial capital to pay fixed and variable costs affects choices firms make regarding export entry and operations and, as a consequence, influences aggregate trade patterns. Financial frictions and the use of internal capital markets shape decisions that multinationals make regarding production locations, integration, and corporate governance. This article surveys this recent research with the goal of highlighting the main themes it explores, the key results it establishes, and the leading open questions it raises.

Suggested Citation

  • C. Fritz Foley & Kalina Manova, 2015. "International Trade, Multinational Activity, and Corporate Finance," Annual Review of Economics, Annual Reviews, vol. 7(1), pages 119-146, August.
    • Handle: RePEc:anr:reveco:v:7:y:2015:p:119-146
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    File URL: http://www.annualreviews.org/doi/abs/10.1146/annurev-economics-080614-115453
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    Keywords

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G3 - Financial Economics - - Corporate Finance and Governance

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