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Multinational Ownership and Subsidiary Investment


  • Wendy Carlin
  • Andrew Charlton
  • Colin Mayer


This paper examines how foreign ownership affects the investment decisions of subsidiary firms using a new dataset of listed-parent − listed-subsidiary pairs. We find that improvements in the investment opportunities of parent firms have a negative effect on the investment of their subsidiaries, after controlling for the investment opportunities of the subsidiary, which can be independently observed. This provides evidence of internal capital markets in multinationals that reallocate funds towards units with better investment opportunities. We also find that the negative effect of the parent’s investment opportunities on subsidiary investment is greatest where the relationship is more arms-length, i.e. where parents have modest ownership stakes, are distant from their subsidiaries or when subsidiaries – as well as parents – operate in well developed financial markets.

Suggested Citation

  • Wendy Carlin & Andrew Charlton & Colin Mayer, 2008. "Multinational Ownership and Subsidiary Investment," OFRC Working Papers Series 2008fe05, Oxford Financial Research Centre.
  • Handle: RePEc:sbs:wpsefe:2008fe05

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    Cited by:

    1. Mamatzakis, Emmanuel & Bermpei, Theodora, 2014. "What drives investment bank performance? The role of risk, liquidity and fees prior to and during the crisis," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 102-117.
    2. BEUSELINCK, Christof & DELOOF, Marc & VANSTRAELEN, Ann, 2011. "Corporate governance and cash policies of multinational corporations," Working Papers 2011020, University of Antwerp, Faculty of Applied Economics.

    More about this item


    Investment; Internal Capital Markets; Foreign Ownership;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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