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Economic policy uncertainty and multinational companies

Author

Listed:
  • Leming Lin
  • Atanas Mihov
  • Leandro Sanz

Abstract

We study the impact and propagation of economic policy uncertainty (EPU) via subsidiary networks of US multinational corporations (MNCs). We find that increases in host-country EPU lead to significant decreases in MNC valuations. We document heterogeneous effects across key firm- and country-level dimensions such as intangible capital intensity, financial constraints, and country institutional quality. Higher EPU in host countries is associated with a decline in the growth of local MNC subsidiary-level assets and employment. We find no evidence of significant average spillover effects of host-country EPU on MNC subsidiaries in other countries and some evidence of negative spillover effects among vertically linked subsidiaries.

Suggested Citation

  • Leming Lin & Atanas Mihov & Leandro Sanz, 2025. "Economic policy uncertainty and multinational companies," Review of Finance, European Finance Association, vol. 29(6), pages 1769-1807.
    • Handle: RePEc:oup:revfin:v:29:y:2025:i:6:p:1769-1807.
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    File URL: http://hdl.handle.net/10.1093/rof/rfaf041
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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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