Investor Recognition of Corporate International Diversification

Firm-level internationalisation and the home bias puzzle

“…Early research by Hughes, Logue & Sweeney (1975), Agmon & Lessard (1977), Mikhail & Shawky (1979) and Logue (1982) concluded that investing in home-based MNEs does indeed yield international diversification benefits, and more recent work by Errunza, Hogan & Hung (1999) and Cai & Warnock (2004) supports the earlier findings. Errunza, Hogan & Hung (1999), for example, show that US investors can mimic foreign market index returns using US domestically traded assets including MNEs, closed-end country funds and American Depositary Receipts (ADRs).…”

“…These include using the international market model to investigate the influence of domestic and foreign market indexes on individual shares (Hughes, Logue and Sweeney (1976), Agmon and Lessard (1977) and Brewer (1981)); M a n u s c r i p t 13 comparing the risk adjusted performance of MNEs and domestic firms; comparing firms on the basis of returns, standard deviations, betas, coefficient of variation and performance measures, such as the Sharpe, Treynor and Jensen measures (Jacquillat and Solnik (1978), Mikhail and Shawky (1979), Senchack andBeedles (1980), Fatemi (1984) and Michel and Shaked (1986)); and more recently, MVS tests (Errunza, Hogan and Hung (1999), Rowland and Tesar (2004)). We use the latter methodology because of its analytical rigour in facilitating a series of related tests of the statistical significance of diversification benefits using consistent benchmark portfolios, and we accompany these with Sharpe ratio measures of their economic benefits.…”

The effects of cross-border bank mergers on bank risk and value

“…It is thus expected that after the merger, the acquirer's return will show a weaker covariance with the home market banking index and a stronger covariance with foreign market banking indexes --the world as a whole and in particular the country where the target bank is located. Agmon and Lessard (1977) showed, for U.S. multinational corporations, that the beta of their return with respect to the home market is lower and the beta on the world index is higher when the proportion of sales outside the U.S. is higher. We examine this issue here.…”

Political Stability and Foreign Direct Investment

“…They are macroeconomic determinants (Hymer, 1960;Agmon and Lessard, 1977;Froot and Stein, 1991), internalization theory (Johanson and Vahlne, 1977), intangible assets (Morck and Young, 1992;Markides and Ittner, 1994;Denekamp, 1995), capital market mispricing (Baker, Foley, & Wurgler 2006), shareholder's wealth effect (Desai, Dukas, & Fatemi, 1995;Strickland and Hamaifar, 1990) and stock market liberalization and corporate governance (Demirguc-Kunt and Levine, 1996;Henry, 2000a,b;Admati and Pfleiderer, 2000).…”