Research summary: The documented discount on globally diversified firms is often cited, but a correlation is not per se evidence that global diversification destroys firm value. Firms choose to globally diversify based on their firm attributes, some of which may be unobservable. Given these exogenous firm attributes, the decision to diversify globally is endogenous and self‐selected. Our study offers a replication of an earlier study. Using the same specifications save for the Heckman selection instrument, our results contradict past research that did not address endogeneity. We posit that the global premium should reflect the value of multinational operating flexibility. We use the 2008–2009 financial crisis as creating exogenous variation to permit a test for the positive change in firm valuation due to global diversification. During the 2008–2009 financial crisis, the premium associated with global diversification became larger and more significant than before the 2008–2009 financial crisis. The churn of subsidiaries entering and exiting countries increased during the crisis, pointing to the value of an operating flexibility to restructure the geography of the multinational network. In all, the results contradict past findings and provide evidence that operating flexibility is more valued during times of high volatility, thus generating the diversification premium. Managerial summary: There are thousands of multinational corporations that have been international for decades and some even longer. They undoubtedly learned that there is money to be made in international markets. Yet, the recent academic literature has found that foreign diversification destroys firm economic value. Our article uses a statistical technique that corrects for an obvious problem. Some firms invest overseas because they are facing troubles, for example, they are experiencing slowing growth and are exiting bad home markets. Once we correct for this “selection bias,” we find that global diversification, at worst, has no negative effect on value. However, during the financial crisis, the value of multinational companies increased. This finding is consistent with the option theory of multinational investment whereby operating in multiple countries permits firms to shift their activities among countries. Overall, our results indicate that there is a reason for why firms globalize: It is profitable. Copyright © 2016 John Wiley & Sons, Ltd.
The US Food and Drug Administration (FDA) expanded access pathway allows patients with life-threatening or serious conditions to access investigational drugs outside of trials, under certain conditions. The 21st Century Cures Act ("Cures Act") requires certain drug companies to publicly disclose their expanded access policies. We characterized the proportion of applicable US biopharmaceutical companies, with an oncology related drug, implementing Cures Act requirements for expanded access policies and whether available policies contain the information described in the Act. We found about one-third of applicable biopharmaceutical companies (32%, 140/423) implemented the Cures Act requirement to have a public expanded access policy. Less than one-third of public policies contained all described information (31%, 44/140). Larger companies and those with at least one drug receiving an FDA expedited designation (59% vs. 21%; P < 0.001), or at least one FDA-approved drug (57% vs. 28%; P < 0.001) were more likely to have a public policy. Our results suggest the Cures Act may be having a limited impact on its goals of supporting timely medical decisions and closing informational gaps for patients and doctors around expanded access to investigational oncology therapies, especially for products sponsored by smaller and newer companies.The US Food and Drug Administration (FDA) expanded access (EA) pathway, sometimes also called compassionate use, is a route for patients with immediately life-threatening or serious diseases or conditions to potentially access experimental medicines outside of clinical trials. To qualify, patients must be unable to enroll in a relevant clinical trial, have no comparable satisfactory alternative FDA approved therapy options, and be deemed more likely to experience benefit than risk from the unapproved intervention. Additionally, expanded access provisions should not threaten a product's development program (e.g., trial enrollment). Formalized in 1987, in the context of the AIDS epidemic, the EA pathway has been amended multiple times, most recently in 2016 through section 561 of the Food, Drug, and Cosmetics Act (FDCA), as a part of the 21st Century Cures Act ("Cures Act").The Cures Act aimed to help increase awareness among patients and clinicians about the processes and procedures for accessing
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