Information Environment and the Investment Decisions of Multinational Corporations
Name
Shroff_Information environment.pdf
Size
353.01 KB
Format
Adobe PDF
Checksum (MD5)
c72a8f1ede8a093ddab8282f79261568
Author(s)
Shroff, Nemit
Yu, Gwen
Verdi, Rodrigo
Date Issued
October 2013
Journal
The Accounting Review
Publisher
American Accounting Association
Citation
Shroff, Nemit, Rodrigo S. Verdi, and Gwen Yu. “Information Environment and the Investment Decisions of Multinational Corporations.” The Accounting Review 89, no. 2 (March 2014): 759–790.
Version
Author's final manuscript
Abstract
This paper examines how the external information environment in which foreign subsidiaries operate affects the investment decisions of multinational corporations (MNCs). We hypothesize and find that the investment decisions of foreign subsidiaries in country-industries with more transparent information environments are more responsive to local growth opportunities than are those of foreign subsidiaries in country-industries with less transparent information environments. Further, this effect is larger when (1) there are greater cross-border frictions between the parent and subsidiary, and (2) the parents are relatively more involved in their subsidiaries' investment decision-making process. Our results suggest that the external information environment helps mitigate the agency problems that arise when firms expand their operations across borders. This paper contributes to the literature by showing that the external information environment helps MNCs mitigate information frictions within the firm.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-Noncommercial-Share Alike
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.2308/accr-50643
