Multinationality, or the degree of internationalization, has
favorable financial results and implications. Highly valued by the
market as a hidden asset, multinationality is related to earnings
management, systematic risk, capital structure, and growth
opportunities as measured by the investment opportunity set.
Riahi-Belkaoui examines the performance results of a multinational
strategy and concludes that multinationality can be quantified and
does play a significant role in keeping a firm healthy and growing.
His book is a far-reaching examination of the data and a persuasive
argument for why firms should make multinationality a critical part
of their overall business strategy.
Riahi-Belkaoui presents research results supporting
multinationality. He confirms that the market reacts more favorably
the larger (smaller) cash flows are (accruals), and he shows that
the preference of cash flows over accruals will increase under
conditions of high multinationality and high reputation. He argues
that the level of multinationality affects net income and net worth
and thereby, political costs and risk. Analyzing the association
between multinationality and systematic risk as measured by the
market model beta, he finds that systematic risk is positively
related to the level of multinationality after controlling for
corporate reputation and other factors. He examines the role of
multinationality and profitability as determinants of the
investment opportunity set and considers whether a firM's
investment opportunity is associated with corporate financing.
Finally, he investigates whether disclosure policy, level of
economic risk, and the nature of the alignment of financial and tax
accounting explain differences in financial analysts' forecast
error internationally. The book concludes with a model of the
determinants of the investment opportunity set of multinational
firms.
General
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