Capital structure effects of international expansion

This study investigates and qualifies the impact of internationalization on the capital structure of a firm. Previous studies have associated firm internationalization with foreign sales or foreign assets. However, an increase in sales volume generated abroad does not necessarily mean that a firm has actually invested in a new foreign country. This study examines non-financial firms included in the main developed stock indexes that report a new geographical area of operation. It reveals that, at less advanced levels of internationalization, growth in foreign volumes and new geographic expansion lead to differential decision-making in capital structure choices.This study concludes that (1) when the target foreign market is developed, the new market entry does not lead to significant changes in capital structure, whatever the past experience of the firm. (2) The capital structure of well-diversified firms is not significantly modified following a new foreign entry. (3) Both domestic firms and firms only active in developed markets significantly increase their debt to equity ratio when expanding into a region or country where they had no operation before. Well-diversified firms clearly exhibit a different behavior compared to firms in less advanced levels of internationalization.     

Capital investment,internationalization, and firm performance: Evidence from Southeast Asian countries

This study asks whether firms that invest more have higher degrees of internationalization and whether firms with higher degrees of internationalization perform better than those with lower degrees of internationalization. Using a large panel sample that consists of non-financial firms in five countries in the Southeast Asia region during the period 1990–2014, I show that capital investment negatively affects the level of internationalization but has a positive effect on foreign sales growth. The negative effect of capital investment on internationalization levels is weaker for firms with higher degrees of internationalization. The level of internationalization is not associated with firm performance, measured as return on assets; however, there is some evidence for the positive relation between the level of internationalization and firm performance, measured as the stock return.     

Firm internationalization and cost of equity: Evidence from China

This paper examines the relationship between firm internationalization and cost of equity. We find that firms with a higher degree of international operations have a significantly lower cost of equity, which is more pronounced for firms in provinces with a weak institutional environment or firms experiencing intense domestic competition. Our results are robust after adopting a firm fixed effect model, propensity score matching, difference-in-difference regressions and alternative measurements of key variables. Further, international operations help firms to break through their institutional constraints in the domestic market, which reduces the cost of equity and improves resource allocation efficiency in the capital market. Our paper enriches the literature on firm internationalization and the cost of equity from the perspective of emerging markets.     

Bank Consolidation, Internationalization, and Conglomeration: Trends and Implications for Financial Risk

This paper documents trends in bank activity, consolidation, internationalization, and financial firm conglomeration with data on more than 100 countries, and explores the extent to which financial firm risk and systemic risk potential in banking are related to consolidation and conglomeration. The relationship between consolidation, conglomeration and financial risk is documented using financial data on the largest 500 financial firms worldwide and on large banks in about 90 countries. We find that (a) large conglomerate firms did not exhibit levels of risk‐taking lower than smaller and specialized firms in 1995, while they exhibited higher levels of risk‐taking in 2000; (b) highly concentrated banking systems exhibited levels of systemic risk potential higher than less concentrated systems during the 1993–2000 period, and this relationship has strengthened during the 1997–2000 period. We outline research directions aimed at explaining why bank consolidation and conglomeration may not necessarily yield either safer financial firms or more resilient banking systems.     

Internationalization,foreign exchange exposure and firm risk

This paper examines the effect of internationalization on variation in operating performance. Analyzing a sample of non-financial firms in Switzerland during 2000–2020, we document two key findings. First, internationalization is positively associated with variation in operating performance. However, neither operational-hedging internationalization nor revenue-seeking internationalization moderates the relation between internationalization and variation in operating performance. Second, our findings show that the unhedged foreign exchange exposure neither strengthens nor weakens the effect of internationalization on variation in operating performance. Further analyses show that internationalization is not associated with firm performance.     

The Degree of Internationalization and the Stock Market Valuation of Earnings

In this paper, we examine the impact of the degree of internationalization on a firm's ability to reduce risk and increase profits. Our study seeks to overcome three limitations of many previous studies on the value of internationalization: use of a single measure of internationalization, accrual-basis accounting measures of firm performance, and a small sample size. We use a multi-measure index, stock market assessment, and a large sample size of various firms. Our findings indicate that (1) a firm's degree of internationalization has a positive impact on the investor response to the earnings changes and (2) the market's positive response to the value of internationalization is confined to a high level of internationalization. Our results do not support the argument that, at high levels of internationalization, the costs of internationalization exceed the benefits.     

The effect of learning by hiring on productivity

This article focuses on the phenomenon of interfirm labor mobility as a potential channel for knowledge transfer. Using data from the Danish employer‐employee register covering the period 1995–2005, we investigate how knowledge carriers—technicians and highly educated workers recruited from a donor firm—contribute to knowledge diffusion and enhanced productivity in the hiring (recipient) firm. Structural estimation of the hiring firms' production functions shows that the impact of the recruitment of knowledge carriers on a firm's value added is an increase of 1%–2%. Several robustness checks confirm this finding.     

Internationalization and firm performance

We argue that industry competition and industry innovation intensity exert an influence on the relation between a firm's internationalization and performance. Using a large panel sample consisting of publicly listed nonfinancial firms in 27 European countries from 1990 to 2016, we document that internationalization is negatively associated with operating performance and firm value. The negative effects of internationalization on operating performance and firm value vary depending on the degree of industry competition or industry innovation intensity. These results imply that industry conditions moderate the effects of internationalization on operating performance and firm value.     

Migration,spillovers, and trade diversion: The impact of internationalization on domestic stock market activity

This paper studies the relation between internationalization (firms cross-listing, issuing depositary receipts, or raising capital in international stock markets) and the trading activity of the remaining firms in domestic markets. Using a panel of 3000 firms from 55 emerging economies during 1989–2000, we find that internationalization is negatively related to the trading activity of domestic firms. We identify two channels. First, the trading of international firms migrates from domestic to international markets and this migration along with the reduction in domestic trading of international firms has negative spillover effects on domestic firm trading activity. Second, there is trade diversion within domestic markets as trading activity shifts out of domestic firms and into international firms.     

The internationalization of Chinese companies: Firm characteristics, industry effects and corporate governance

A prominent issue in the internationalization of Chinese firms is that many are state-owned enterprises (SOEs) and that corporate governance in China is highly idiosyncratic. This paper identifies firm characteristics, industry effects and corporate governance mechanisms that foster internationalization. We find that Chinese cross-border mergers create shareholder value, but not more than domestic expansions. Corporate governance mechanisms matter, jointly and individually. While state-ownership predicts fewer cross-border mergers, a favourable board structure and corporate transparency explains higher M&A returns. As in more mature markets, firm- and industry-specific determinants also affect M&As in China.     

The making of the management accountant - Becoming the producer of truthful knowledge

In this paper, we analyse the practices through which the management accountant is constructed as a knowing subject and becomes a producer of truthful knowledge. We draw on a case study of an automobile equipment manufacturer in which management accountants play a central role. The centrality of their role is evidenced, among other aspects, by their participation in online reverse auctions, wherein they commit themselves and their company to long-term projects. This commitment is constitutive of their identity as knowing subjects and organisational truth tellers. However, the “validity” of the truth they produce can only be assessed over time. We argue that, in this firm, monthly performance review meetings constitute “accounting trials of truth” during which peers and senior management cross-examine the accounting truth presented. Preparations for these trials of truth constitute a form of subjectivation whereby management accountants act on their ways of being in the firm and become the producers of truthful knowledge.     

Discussion of “Feedback loops, fair value accounting and correlated investments”

My paper discusses Bloomfield, Nelson, and Smith’s (BNS) model and experimental study of the price dynamics that arise when a firm’s accounting reports are predictable from its stock returns. This phenomenon occurs when the firm takes a position in an asset that generates unrealized gains and losses (UGL’s) that are correlated with the firm’s own returns. My discussion of BNS focuses on three features that are often used to evaluate research—namely, potential for falsification, internal validity, and external validity. I view and evaluate the BNS paper in light of each of these features. I also briefly comment on how well the paper addresses issues related to fair value accounting.     

企业技术并购、自主研发投资与创新效率——来自技术密集型行业的实证

以沪深两市技术密集型行业企业为样本,研究主并企业并购前自主研发投资形成的研发资本存量和对外技术并购获取技术知识两方面对其并购后创新效率产生的混合作用,再进一步检验并购双方技术重叠在主并企业并购前自主研发投资和并购后创新效率之间关系的调节作用.研究表明:企业并购前自主研发投资形成的知识储备量会促进其并购后创新效率的提升.技术并购及并购双方的技术重叠进一步放大了这种正向促进作用,说明技术并购及技术重叠会加强主并企业内部自主研发对外来创新能量的内化、吸收速度,并改善和提升内部研发投资效率.同时,在并购前持续追加研发投资的主并企业中,这种现象和作用也会更为明显.     

An institutional perspective on the changes in management accountants’ professional role

The paper theorises how a new actor of a firm can drive the institutionalisation of a new role for management accountants. Drawing on institutional theory and using insights from a single case study in a German manufacturing firm, the paper analyses the institutionalisation of the so-called “business partner” role for management accountants, which was promoted and driven by the case firm's newcomer CFO. The paper focuses on the micro-processes and especially the institutional work carried out by the new CFO that supported the entrenchment of the “business partner’ role within the case firm. In this light, we illustrate that especially three interrelated kinds of institutional work were carried out within the case firm to support the institutionalisation of the management accountants’ new role: (1) legitimising the new “business partner” role, (2) (re-)constructing the management accountants’ role identities and (3) linking the intra-organisational level with an institutional environment in which external actors aim to achieve changes in the management accountants’ role on a broader societal level. In this context, the paper also provides insights into the specific German management accounting context. Overall, the findings suggest that the institutionalisation of a new role for management accountants can be understood as the product of purposive actions carried out by actors to support a specific institutional arrangement within the firm.     

The determinants of Norwegian exporters’ foreign exchange risk management

Abstract

This paper examines foreign exchange (FX) hedging by Norwegian exporting firms to provide empirical evidence on the determinants of the hedging decision. The paper contributes to prior studies by, first, focusing on exporters to ensure that the companies in the sample have FX exposure, thereby allowing a more rigorous test of the theoretical determinants of hedging, and, secondly, in contrast to most previous studies that have focused on FX external hedging instruments, the use of both internal and external instruments is examined. Univariate, multivariate and multinominal analyses all provide evidence consistent with the firm value maximization hypotheses of underinvestment and risk aversion. Also, the following characteristics of firms—size, extent of internationalization and liquidity—are found to be related to the decision to hedge FX risk. However, the evidence on the links between the firm characteristics and the decision to hedge is not consistent across internal and external FX hedgers, and also varies for individual hedging instruments. Therefore it is argued that the empirical evidence on the theoretical determinants cannot be generalized to cover the full range of FX hedging strategies (which includes internal hedging instruments). Unlike empirical studies for other countries the evidence for Norwegian firms does not support the hypothesis that the avoidance of financial distress and the need to resort to external capital markets is a significant determinant of the hedging decision. Whilst the evidence suggests that country-specific factors may play a role in determining the use of FX hedging, it does not imply that the different policies adopted are necessarily inconsistent with the firm value maximization hypothesis.     

Firm Internationalization and Capital Structure in Developing Countries: The Role of Financial Development

We investigate the relationship between internationalization and the level of debt financing for more than 18,000 firm/year observations from thirty-one developing countries in the period 1991-2006. We argue that this relationship can be affected by both country-level and firm-level factors. The results show that in developing countries with relatively higher financial development, firm internationalization corresponds with a greater level of debt when firms have more growth opportunities (which also indicate a higher level of asymmetric information). This evidence suggests that relatively developed financial markets in developing countries at least partially mitigate the effect of asymmetric information and decrease the agency cost of debt for firms with higher levels of internationalization.     

Onesource Corporate Consulting,Inc.: Tax and financial reporting considerations

This case places you in the role of a new staff accountant at a public accounting firm who is asked to research financial accounting and tax issues for a client engagement. The client, Onesource Corporate Consulting, Inc. is a large, rapidly growing and successful consulting firm that specializes in corporate restructuring work, forensic investigations, litigation consulting, strategic communications consulting, economic consulting, and technology development. You must research issues affecting the company’s financial statements and tax reporting, including: contingent debt, forgivable loans issued to employees, revenue recognition for various types of contracts, and lease incentives. You will likely find this case challenging. However, this case is based on a real company and the research and analysis required in this case is reflective of issues and assignments you may encounter early in your career.     

Entrepreneurs’ passion,home country’s institutional voids and small firm internationalization

The international entrepreneurship literature has revealed that entrepreneurs’ psychological characteristics drive a firm’s degree of internationalization. However, drivers that relate to entrepreneurs’ passion are not well developed in the international entrepreneurship literature. To fill this gap, this study uses a sample of 233 small firms to examine how entrepreneurs’ passion is related to small firms’ degree of internationalization and it also investigates whether this relationship is affected by levels of the home country’s institutional voids. The results show that passion is positively related to firms’ degree of internationalization and this relationship is positively moderated by levels of institutional voids. Implications for theory and practice are discussed.     

Firm characteristics and selection of international accounting software

We report the results of a survey of international U.S. companies focused on the selection of international accounting software. We investigate the relationships among firm characteristics (size and degree of internationalization), international features of accounting software (multicurrency, multireporting, and multilingual), and general selection criteria (support and security, hardware and operating platforms, and flexibility and cost). We find that firms’ reported preferences for international features differ depending on size and degree of internationalization. However, the relationship between firm characteristics and general selection criteria is not significant. The implication from our results is that firm characteristics should be an important consideration in the selection and design of international accounting software.     

国际收支结构研究:基于人民币国际化视角的分析

跨境贸易人民币结算试点标志着人民币国际化已经进入了一个新的阶段。人民币国际化是一个由初级到高级逐步发展的渐进过程。人民币国际化的不同阶段需要不同的条件。本文主要探讨了人民币国际化不同阶段所要求的国际收支结构特征,在此基础上,结合我国当前的国际收支结构状况,对国际收支政策及人民币国际化战略提出建议。