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On the Origins of the Multinational Premium

Author

Listed:
  • Fillat, José L.
  • Garetto, Stefania

Abstract

We study the relationship between management, multinational expansion, and risk premia. We document two facts: firms run by better managers are more likely to become multinationals (MNEs), and risk premia are higher for current and future MNEs than for firms that remain exclusively domestic. We develop a model in which endogenous matching between heterogeneous firms and managers jointly determines selection into foreign direct investment (FDI) and risk premia. Quantitatively, we use the model to examine how corporate taxation and distortions in the market for managerial talent affect multinational activity, firm risk exposure, and financial market outcomes.

Suggested Citation

  • Fillat, José L. & Garetto, Stefania, 2026. "On the Origins of the Multinational Premium," CEPR Discussion Papers 21610, Centre for Economic Policy Research.
    • Handle: RePEc:cpr:ceprdp:21610
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    File URL: https://cepr.org/publications/DP21610
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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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