Multinationality as real option facilitator – Illusion or reality?

Publication: Research - peer-reviewJournal article

DOI

  • Tom Aabo
  • Christos Pantzalis
    Christos PantzalisUniversity of South FloridaUnited States
  • Jung Chul Park
    Jung Chul ParkUniversity of South FloridaUnited States
Previous literature provides multiple conflicting arguments on why and when multinationality should enhance or impede the value-relevance of firms’ real options. We address this issue by examining whether the relationship between stock returns and changes in return volatility varies with multinationality. Our results indicate that multinationality does indeed act as a real option facilitator. Furthermore, we show that, consistent with the notion that there are limits to the operating flexibility associated with multinationality this benefit only accrues fully if the firm is not financially constrained and stabilizes at very high degrees of multinationality.
Original languageEnglish
JournalJournal of Corporate Finance
Volume38
Pages (from-to)1-17
Number of pages17
ISSN0929-1199
DOIs
StatePublished - 2016

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