Host-Country Financial Development and Multinational Activity

Kamran Bilir, Davin Chor, Kalina Manova

This paper evaluates the influence of host-country financial development on the global operations of multinational firms. Using detailed U.S. data, we provide evidence that host-country financial development increases entry by multinational affiliates, while also decreasing affiliate sales in the local market relative to the parent country and third-country destinations. These effects are more pronounced in industries that depend more on external sources of financing. The patterns are consistent with the combination of two effects of financial development: 1) a competition effect that reduces individual affiliates' revenues in the host market due to increased entry by domestic firms, and 2) a financing effect that raises affiliate entry and aggregate sales due to affiliates' improved access to external finance in the host country

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Year of publication:	April 2014
Authors:	Bilir, Kamran
Other Persons:	Chor, Davin (contributor) ; Manova, Kalina (contributor)
Institutions:	National Bureau of Economic Research (contributor)
Publisher:	Cambridge, Mass : National Bureau of Economic Research
Subject:	Welt \| World \| Multinationales Unternehmen \| Transnational corporation \| Finanzsektor \| Financial sector \| Schätzung \| Estimation \| Amerikanisch \| American \| Entwicklung \| Economic development \| Auslandsinvestition \| Foreign investment \| Absatz \| Sales \| Internationaler Markt \| International market

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