Risk, Returns, and Multinational Production
*

Fillat, Jose L.; Garetto, Stefania

doi:10.1093/qje/qjv031

Cited by 97 publications

(53 citation statements)

References 63 publications

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“…Estimated values of these parameters that reject this restriction would thus suggest the importance of a new, international dimension of R&D effects within the multinational firm. 29 Furthermore, equation 14allows for a range of degrees of substitutability between parent and affiliate R&D in determining affiliate performance: our model is consistent with parent and affiliate R&D interacting positively or negatively as performance determinants. Finally, the model treats the elements of µ as technological parameters.…”

Section: Interpreting Innovation Effects In the Modelsupporting

confidence: 63%

Innovation in the Global Firm

Bilir¹,

Morales²

2016

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How global are the gains from innovation? When firms operate production plants in multiple countries, technological improvements developed in one location may be shared with foreign sites for efficiency gain. We develop a model that accounts for such transfer, and apply it to measure private returns to R&D investment for a panel of U.S. multinationals during 1989-2008. Our estimates indicate that innovation increases performance at firm locations beyond the innovating site: the median U.S. multinational firm realizes abroad 20 percent of the return to its U.S. R&D investment, suggesting estimates based only on domestic operations understate multinationals' gain from innovation, and revealing a spatial disconnect between the costs and potential gains of policies that encourage multinationals' U.S. innovation.

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Section: Interpreting Innovation Effects In the Modelsupporting

confidence: 63%

Innovation in the Global Firm

Bilir¹,

Morales²

2016

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“…A related contribution is Fillat and Garetto (), who find that multinational corporations earn higher excess returns than nonmultinationals.…”

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confidence: 99%

The Globalization Risk Premium

Barrot¹,

Loualiche²,

Sauvagnat

2019

The Journal of Finance

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In this paper, we investigate how globalization is reflected in asset prices. We use shipping costs to measure firms' exposure to globalization. Firms in low shipping cost industries carry a 7% risk premium, suggesting that their cash flows covary negatively with investors' marginal utility. We find that the premium emanates from the risk of displacement of least efficient firms triggered by import competition. These findings suggest that foreign productivity shocks are associated with times when consumption is dear for investors. We discuss conditions under which a standard model of trade with asset prices can rationalize this puzzle.RECENT DECADES HAVE BEEN CHARACTERIZED by a high degree of trade integration. This era of globalization 1 is generally seen in a positive light, as it has been associated with more product variety at lower prices, cheaper intermediate goods, and greater access for U.S. firms to foreign markets. 2 Yet globalization also makes domestic economies more sensitive to foreign shocks. A salient * Jean-Noël Barrot is with HEC Paris and CEPR. Erik Loualiche is with the University of Minnesota, Carlson School of Management. Julien Sauvagnat is with Bocconi University and CEPR. For helpful comments, the authors thank Stefan Nagel (the Editor); Nick Bloom; Maria Cecilia Bustamante (discussant); Bernard Dumas (discussant); Nicola Gennaioli; Matthieu Gomez; Pierre-Olivier Gourinchas; Tarek Hassan (discussant); Christian Julliard; Matteo Maggiori (discussant); Jonathan Parker; Carolin Pflueger; Thomas Philippon; Nick Roussanov (discussant); Chris Telmer (discussant); Adrien Verdelhan; Michael Weber (discussant); anonymous referees; and seminar participants at MIT Sloan, SED annual meetings 1 σ J −1 . 24 We show formally in Internet Appendix Section I.A that the consumption index is C J = ( J c J (ϕ) σ J −1 σ J dϕ) σ J σ J −1 and the price index is P J = ( J p J (ϕ) 1−σ J dϕ) 1 1−σ J .We show that average profits of firms' domestic operations are π D,J (φ D,J ) and average profits for exporting operations are π X,J (φ X,J ). We define the fraction of firms that decide to export as ζ J = Pr{ϕ > ϕ X,J }. Finally, we express the profits of domestic firms from all their operations asEquilibrium: The aggregate budget constraint can be expressed in terms of the final composite consumption good, C, the aggregate price index, P, and the revenues of firms flowing back to households, , such that in each country we have PC ≤ L + .Under financial autarky, as is the case in Ghironi and Melitz (2005), households only receive the proceeds of domestic firms' operations, such that AUT = J J . Under perfect risk-sharing, households receive a share of world industry profits relative to their capital endowments, RS = J M J M J +M J

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“…In column (2) to (3), adopting the method mentioned by Fillat et al (2015), firm's financial leverage (Leverage, represented by asset-liability ratio) and the book-to-market ratio are added in the equation respectively to control the impact of export firms' own resources and borrowed resources of different proportions on the export behavior. In column (4), the logarithmic of the firm's inventory turnover days (Log_turnover) is added to the equation to control the impact of the firm's product operating capability on export adjustments.…”

Section: Robustness Analysismentioning

confidence: 99%

“…Manova (2008) proves, from the point of view of financing constraints, that the export behavior of firms are directly linked to the openness of the stock market. Fillat et al (2015) also pointed out that multinational export firms have higher stock returns than nontransnational export firms. Second, there are literature on the mature method of calculating heterogeneous stock return (such as Mark et al, 2014).…”

Section: Introductionmentioning

confidence: 99%

Research on the Peer Effect of Firms’ Export Behavior

Pan

Guo

2017

EURASIA J MATH SCI T

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Because of the information asymmetry and risk uncertainty, export firms will learn to adjust export decisions from their peers. Based on the micro-matching data of China's customs export products and listed firms, this paper examines the peer effect of firms export activities by introducing equity shock as an exogenous variable. It is found that first, the values, scopes and number of destinations of exporters' products are positively influenced by their peer firms; second, exporters with lower product quality, growth capability and export intensity will follow those exporters with better export performances to change their behaviors. These asymmetric results prove that peer effect of firms' export behavior is in accordance with the law of logical imitation; third, CEOs with different demographic characteristics have great impact on the magnitude of export peer effect, showing that risk preferences and cognitive patterns of CEOs are significant for firms' export behavior.

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Risk, Returns, and Multinational Production *

Cited by 97 publications

References 63 publications

Innovation in the Global Firm

Innovation in the Global Firm

The Globalization Risk Premium

Research on the Peer Effect of Firms’ Export Behavior

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