تنوع بین المللی شرکت و هزینه حقوق صاحبان سهام: شواهد اروپا
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|14683||2008||22 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of International Money and Finance, Volume 27, Issue 1, February 2008, Pages 102–123
This paper analyzes the impact of corporate international diversification (CID) on domestic and world betas through the notion of psychic distance between countries. Using a large European sample of 598 firms, our findings indicate that this dimension significantly influences corporate risk exposure. By isolating three additive components of the Foreign Sales Ratio (FSR), we obtain the most significant results by geographically partitioning the sample, provided that firms are further classified by sector. Our framework sheds new light on how the CID of firms belonging to Sweden and the United Kingdom, as well as the Consumer Cyclical, Consumer Non-Cyclical and Information Technology sectors, sometimes can reduce and sometimes increase firm betas.
Whether corporate international diversification (CID) influences stock prices is a subject that has received a great deal of attention over the last three decades. This is still a relevant question for investors, insofar as they may require their diversified portfolio to exhibit the best possible asset allocation. Managers should also be concerned about the impact of the international capital budgeting process in their assessment of the cost of equity. However, this question is somewhat unresolved, mainly as a result of inappropriate specifications of an internationalization index and of the avoidance of other elements, such as industry-specific dimensions. Indeed, current literature is paying growing attention to industry factors, which tend to exhibit an increasing importance relative to geographical factors.1 Specifically, little research has attempted to take into consideration the psychic distance of a firm's international commercial markets, despite the fact that it is recognized as a key dimension in the internationalization process literature. In relation to this issue, the purpose of this paper is to develop a framework that introduces the diversification effect of the geographical breakdown of a firm's activities on stock betas. We partition the traditional measure, namely the Foreign Sales Ratio, in order to incorporate the psychic distance of each geographical area of destination. We pay particular attention to the sensitivity of world betas to the geographical dispersion of corporate activities, because no measure of psychic distance can fully account for the complex interrelationships between international stock markets. We test our set of internationalization indexes against a sample of European internationalized companies and compare their information contents with the Foreign Sales Ratio. Our second objective is to show that the existing relationship between firm internationalization and systematic risk is not necessarily invariant to the industry or to the country the firm belongs to. The effect of expanding corporate international activities on shareholders' returns may vary greatly according to the industry's characteristics, notably the level of product differentiation, the level of entry barriers and ownership restrictions, as well as to the nationality of the firm. In the empirical part of this article, we provide evidence that a proper account of this double characteristic greatly improves the understanding of the effect of psychic distance on the behavior of stock returns. We show that there is some homogeneity in the sensitivities of stock betas with respect to their corresponding internationalization index for firms belonging to the same sector, but that the scale of these sensitivities depends on their country of origin. Failure to account for both components would lead to the neglect of very useful information. This framework enables us to shed new light on the impact of CID on firms belonging to two countries (Sweden and UK), whilst also highlighting the impact on the Consumer Cyclical, Consumer Non-Cyclical and Information Technology sectors. Not only do we relate our findings to the previous literature on the effects of corporate international diversification, but we can also combine this evidence with an explanation relating to the psychic distance of the geographic destinations of internationalized firms. The paper is organized as follows. Section 2 reviews the literature and introduces the psychic distance concept. Section 3 presents our model that incorporates this notion. Data, methods and the construction of the internationalization indexes are proposed in Section 4. Evidence regarding the effect of corporate international diversification is reported in Section 5. Section 6 proposes an interpretation of the various effects. Section 7 concludes.
نتیجه گیری انگلیسی
In this paper, we have introduced and tested a theoretical relationship between the degree of international involvement of a firm and its domestic and international risk exposures. The concept of psychic distance, defined as the perceived distance between the home country and a foreign country resulting from cultural, business and political differences – a notion otherwise widely used in the international business literature – finds a very direct application in the characterization of corporate systematic risk. On this basis, we identify three additive components of corporate internationalization: the direct impact of internationalization of corporate activities on both the domestic and world betas, a pure psychic distance component, and the indirect diversification effect created by the geographic portfolio of a firm's activities. These components tend to outperform the traditional measures, such as the single FSR, for homogenous populations of multinational companies. Empirical evidence suggests that firms generally modify their domestic and international exposures by taking into account psychically distant markets, which are not perfectly in phase with their domestic country. When the sector-based heterogeneity of companies is taken into account, similar patterns of risk sensitivity can be isolated between the countries under study. We nevertheless observe contrasting results between sectors. This analysis enables us to highlight two countries (Sweden and UK) and three sectors (Consumer Cyclical, Consumer Non-Cyclical, Information Technology) displaying strong effects. Furthermore, our theoretical setup enables us to provide an integrated set of explanations, all related to the concept of psychic distance, associated to the set of remarkable regularities. This point of view sheds new light on the absence of conclusive and homogenous results for the other countries and/or sectors. They might indicate that countries or sectors are not the right aggregation levels to analyze the impact of corporate international diversification on stock betas, and that a finer partitioning is necessary. Further research should pay particular attention to the specifications of the returns generating processes, as the international asset pricing model that we have been using can only be considered as a raw proxy for a pricing model that would accurately price stocks of internationally active companies. This is part of our ongoing agenda.