The Multinational Advantage

Using a proprietary dataset, we evaluate whether the degree of foreign operations affects firm value by comparing actual value to imputed value for U.S. multinational corporations (MNCs). We argue that using benchmark firms operating in the same country and industry as each MNC segment controls for differences in discount rates and expected growth rates across countries and industries. This allows us to isolate the value effects of organizing a set of otherwise independent activities within a multinational network. We find robust evidence that multinational networks trade at a premium relative to a benchmark portfolio of independent firms.