Shareholder benefits from corporate international diversification

Article Abstract:

More evidence on the rates of return realized by the shareholders of multinational firms in relation to those of purely domestic firms is provided. The risk-adjusted returns realized by the shareholders are found to be identical through the two groups except where the multinational corporation (MNC) operates in competitive foreign markets. With respect to the risk-reduction effect of international diversification, it was found that the higher the degree of international involvement, the lower the beta. Initial evidence on the effect of corporate international diversification on shareholders' returns reveals that abnormal returns rise by about 18 percent during the 14 months preceding the initial foreign diversification.

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Debt-for-equity swaps under a rational expectations equilibrium

Article Abstract:

This paper analyzes LDC debt-for-equity swaps under a rational expectations equilibrium. Under full information, the swap can never be strictly preferred by the LDC, the MNC, and the bank. Under the postulated informational asymmetry assumptions the same results obtain, leading to the "lemons" market in reverse. Under rational expectations, the swap can only occur if the loan is correctly valued relative to all private information in the economy. Given that some swaps do occur, future models must reflect the unique features of swaps. (Reprinted by permission of the publisher.)

Research, International aspects, Economic policy, Developing countries, External debts, Debt equity conversion

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Distance constraints: the limits of foreign lending in poor economies.

Article Abstract:

The mobility of multinational banks to solve problems of poor economies is analyzed.

Financial management, Illinois, Multinational Corporations, Company financing

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