Financial sector diversification and MNC valuation

We extend the literature on MNC performance by examining the relationship between market valuation of MNCs and intangibles associated with financial expertise. We identify firms as having financial expertise if they have diversified their business in the financial sector. We argue that financial exp...

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Bibliographic Details
Published inJournal of multinational financial management Vol. 19; no. 5; pp. 343 - 354
Main Authors Kim, Chansog Francis, Margetis, Speros, Pantzalis, Chris
Format Journal Article
LanguageEnglish
Published Elsevier B.V 01.12.2009
Elsevier
SeriesJournal of Multinational Financial Management
Subjects
Diversification
Financial performance
Intangibles
International finance
International finance Multinational firms Diversification Valuation Intangibles
Knowledge
Market analysis
Multinational enterprises
Multinational firms
Valuation
Valuation
F23
Intangibles
Multinational firms
F37
Diversification
International finance
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Summary:We extend the literature on MNC performance by examining the relationship between market valuation of MNCs and intangibles associated with financial expertise. We identify firms as having financial expertise if they have diversified their business in the financial sector. We argue that financial expertise enhances the ability of MNCs to internalize financial transactions and take advantage of financing and investment opportunities around the world. Therefore, it is a potentially significant source of market power. Our test results demonstrate that as the degree of multinationality increases market valuation is positively related with financial expertise even after we account for several other control factors. Our findings imply that MNCs with financial expertise can be viewed as possessing an additional intangible, which essentially is the financial equivalent of the traditionally examined intangible assets, such as technological “know-how,” goodwill, and managerial expertise.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:1042-444X
1873-1309
DOI:10.1016/j.mulfin.2009.07.002