Multinationality and opaqueness

• Published in: Journal of corporate finance (Amsterdam, Netherlands) Vol. 30; pp. 65 - 84
• Main Authors: Aabo, Tom, Pantzalis, Christos, Park, Jung Chul
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.02.2015; Elsevier Science Ltd
• Subjects: Economic theory; Impact analysis; Internationalization theory; Multinational corporations; Multinationality; Multiple regression analysis; Opaqueness; Organizational structure; Statistical analysis; Stock market valuation; Stock prices; Studies; United States > US; Stock prices; Multiple regression analysis; G30; F23; Internationalization theory; Stock market valuation; G14; Opaqueness; Multinationality
• ISSN: 0929-1199; 1872-6313
• DOI: 10.1016/j.jcorpfin.2014.12.002

We investigate whether and how multinationality affects the opaqueness of the firm. We use multiple alternative measurements of multinationality and opaqueness. Spanning nearly three decades for a large sample of US non-financial firms, we find a statistically and economically significant, positive relationship between multinationality and opaqueness. We find that this positive relationship hinges on whether or not the degree of foreign involvement is compatible with the structure of the firm's foreign operations network. Our results imply that multinationality's impact on opaqueness is alleviated when there is harmony between the size of foreign involvement and the extent of the MNC network's geographic dispersion. Previous literature has implicitly assumed a simple, positive relationship. This is the first study to explicitly address the question in a comprehensive manner. •We find a positive relationship between multinationality and opaqueness.•Multinationality is determined by the foreign sales ratio and foreign affiliates.•The results are robust to several measures of opaqueness.•We confirm that our results are not driven by small, illiquid firms.•The association between multinationality and opaqueness is sizeable in sub-periods.