Bus Val

Powerful Essays
J. of Multi. Fin. Manag. 21 (2011) 55–67

Contents lists available at ScienceDirect

Journal of Multinational Financial
Management
journal homepage: www.elsevier.com/locate/econbase

Factors in multinational valuations: Transparency, political risk and diversification
NyoNyo A. Kyaw ∗, John Manley, Anand Shetty
Department of Finance, Business Economics and Legal Studies, Hagan School of Business, Iona College, New Rochelle,
NY 10801, United States

article

info

Article history:
Received 5 August 2010
Accepted 14 December 2010
Available online 21 December 2010
JEL classification:
F37, G30
Keywords:
Multinationals
Valuation
Transparency
Geographic diversification
Political risk

abstract
This paper examines the role of geographic diversification, transparency, and political risk, in the determination of the value of multinational corporations (MNCs). Using alternative measures for geographic diversification, this paper finds the evidence supporting the positive effect of the degree of multinationality on the firm value. The evidence also provides support for the theories that argue that political risk and transparency have negative impact on the
MNC value.
Published by Elsevier B.V.

1. Introduction
The factors impacting the performance of multinational firms remain of much interest to managers, investors and researchers. A number of theories have been put forth and tested empirically to link the international expansion with the firm value. The internalization theory (INT) posits the idea that multinational firms can create value by internalizing the markets for key intangible assets of the firm such as marketing, managerial and production skills, patents and goodwill. For example, Malone and Rose (2006) argue that a firm’s unique intangible assets provide a competitive advantage that may be best claimed through geographic expansion. Using transaction cost theory, they argue that man-

∗ Corresponding author at: Department of



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