TY  - JOUR
AU  - Desai, Mihir A
AU  - Foley, C. Fritz
TI  - The Comovement of Returns and Investment Within the Multinational Firm
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10785
PY  - 2004
Y2  - September 2004
DO  - 10.3386/w10785
UR  - http://www.nber.org/papers/w10785
L1  - http://www.nber.org/papers/w10785.pdf
N1  - Author contact info:
Mihir A. Desai
Graduate School of Business Administration
Harvard University
Soldiers Field
Boston, MA 02163
Tel: 617/495-6693
Fax: 617/496-6592
E-Mail: mdesai@hbs.edu

C. Fritz Foley
Graduate School of Business Administration
Harvard University
Soldiers Field
Boston, MA 02163
Tel: 617/495-6375
Fax: 617/496-8443
E-Mail: ffoley@hbs.edu
M1  - published as Mihir A. Desai, C. Fritz Foley. "The Comovement of Returns and Investment within the Multinational Firm," in Richard H. Clarida, Jeffrey Frankel, Francesco Giavazzi and Kenneth D. West, editors, "NBER International Seminar on Macroeconomics 2004" The MIT Press (2006)

AB  - Can financial integration, particularly the cross-border investments of multinational firms, help explain the synchronization of business cycles? This paper presents evidence on the comovement of returns and investment within U.S. multinational firms to address this question. These firms constitute significant fractions of economic output and investment in most large economies, suggesting that they could create significant economic linkages. Aggregate measures of rates of return and investment rates of U.S. multinational firms located in different countries are highly correlated across countries. Firm-level regressions demonstrate that rates of return and investment rates of affiliates are highly correlated with the rates of return and investment of the affiliate's parent and other affiliates within the same parent system, controlling for country and industry factors. The evidence on these interrelationships and the importance of multinationals to local economies suggests that global firms may be an important channel for transmitting economic shocks. This evidence also sheds light on asset pricing puzzles related to the diversification benefits provided by multinational firms.
ER  -