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Corporate internationalization, subsidiary locations, and the cost of equity capital

Author

Listed:
  • Atanas Mihov

    (Federal Reserve Bank of Richmond)

  • Andy Naranjo

    (University of Florida)

Abstract

This study examines the relationship between corporate internationalization and the cost of equity capital. We find that international diversification reduces the cost of equity. The diversification benefits are particularly strong during the 2008 financial crisis and for financially constrained firms. We also find that market-specific factors serve as important channels through which the corporate internationalization effects amplify or attenuate. Overall, our study provides support for theories that multinational companies perform valuable diversification functions to investors in a world with segmented and imperfect financial markets.

Suggested Citation

  • Atanas Mihov & Andy Naranjo, 2019. "Corporate internationalization, subsidiary locations, and the cost of equity capital," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(9), pages 1544-1565, December.
    • Handle: RePEc:pal:jintbs:v:50:y:2019:i:9:d:10.1057_s41267-018-00207-3
    DOI: 10.1057/s41267-018-00207-3
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