International diversification and firm’s value: evidence from developing nations

Abstract

Purpose This paper aims to evaluate the impact of international diversification, through the investment abroad activities of the Malaysian multinational corporations (MNCs), on their financial performance. Design/methodology/approach The paper applies the panel generalized method of moments (GMM) estimation technique that gives better results. Findings The empirical findings show that the move to invest abroad has brought a positive impact on Malaysian MNCs’ financial performance. However, in terms of a firm’s risk, the results contradict the general internationalization-risk hypothesis. Research limitations/implications The study focuses on the top 100 multinational firms; future researchers may extend the time period and use the entire sample of all the multinational firms. Practical implications Foreign investments offer rewarding returns due to cheaper labour and raw materials, competitive edge in terms of technological advancement and larger market opportunities. Originality/value The paper contributes to the literature using the panel GMM’s estimation that effectively control for reverse causality and serial correlation problem. The paper also contributes to the international diversification and performance relationship, in a fast-growing Malaysia.

The role of personality in SMEs internationalization: empirical evidence

“…Firms from emerging economies pursue international markets to gain competitive advantage and to escape unfavorable domestic institutional environments (Ram on- Llorens et al, 2017;Hazarbassanova, 2016). Internationalization provides numerous advantages such as growth opportunity, new knowledge, access to new resources and long-term profitability growth (George et al, 2005;Hazarbassanova, 2016;Bany-Ariffin et al, 2016;Hsu et al, 2013;Yiu et al, 2007;Zhang et al, 2016) and has become the most crucial strategic decision for the emerging SMEs (Adomako et al, 2017). However, it has been observed that a majority of SMEs cannot succeed in entry into foreign markets due to lack of resources, managerial skills and experiences (Onkelinx et al, 2016).…”

Factors affecting strategy implementation

“…It is obvious that the Middle East is characterized by a turbulent and an unstable environment (Aghimien, 2016;Maji and Goswami, 2016;Niazi and Hassan, 2016). It is also proven that Jordan, as a developing country, is the safest country in the Middle East that attracts many organizations to invest (Bany-Ariffin et al, 2016;Moideenkutty et al, 2016;Sharma et al, 2017). Moreover, and owing to these circumstances, the pharmaceutical manufacturing sector in the Middle East had become an increasingly competitive one.…”

Diversification strategies and equity market performances

“…Circumstances where this diversification is costly to emerging markets can be when a diversification increases the "responsiveness of the multinationals" employment in each country to productivity shocks, channeling the average employment from the more to the less volatile location, and reducing the multinationals' total expected employment in emerging markets. " Bany-Ariffin et al (2016) demonstrated in empirical findings that investing abroad had a positive impact on Malaysian MNEs" financial performance. Furthermore, looking at the relationship between FDI and migration patterns, Alcaraz and Salamanca (2018) shared in their findings that international migration from the European Union and North America to Latin America is, "related to the firms' FDI and their respective location".…”