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Why Investors Value Multinationality

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  • Morck, Randall
  • Yeung, Bernard

Abstract

The authors examine the value of multinationality to investors as reflected in firms' q ratios. The positive impact of research and development and advertising spending on a firm's q is enhanced by multinationality, but multinationality itself has no significant impact. This supports the internalization theory's prediction that intangible assets are necessary to justify direct foreign investment and, thus, a recent strand of trade literature that assumes multinational firms have intangible assets with public good properties. The authors' results do not support the hypothesis that investors value multinational firms as a means of diversifying their portfolios internationally. Copyright 1991 by University of Chicago Press.

Suggested Citation

  • Morck, Randall & Yeung, Bernard, 1991. "Why Investors Value Multinationality," The Journal of Business, University of Chicago Press, vol. 64(2), pages 165-187, April.
  • Handle: RePEc:ucp:jnlbus:v:64:y:1991:i:2:p:165-87
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