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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26401
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| Title: | THE OPERATIONAL HEDGING PROPERTIES OF INTANGIBLE ASSETS: THE CASE OF
NON-VOLUNTARY FOREIGN ASSET SELLOFFS |
| Authors: | Doukas, John A.
Padmanabhan, Prasad |
| Issue Date: | 8-Feb-2002 |
| Series/Report no.: | FIN-02-006 |
| Abstract: | In this paper we examine the valuation effects and long-term performance
of U.S. multinational firms involved in forced transfers of their
foreign operating assets during the 1965-1988 period. The evidence
suggests that the operational hedging ability of the firm to address
country risk (nationalization threats) is related to the level of its
intangible assets. While it is well known that firms with high levels of
intangible assets prefer foreign direct investment, our results show
that intangible assets have hidden properties of protection against
country risk as well. We document significantly negative abnormal
returns only for divesting firms with low levels of intangible assets,
but not for firms with high levels of intangible assets. In addition, we
show that low (high) growth firms are involved in partial (complete)
withdrawals, and show that the long-term economic performance of firms
choosing the complete withdrawal strategy is better than those that opt
to remain. We argue that management's attempt to maintain economic links
in a hostile foreign environment can be attributed in part to the firm's
low growth opportunities, performance, and lack of contingent plans to
address country risk. |
| URI: | http://hdl.handle.net/2451/26401 |
| Appears in Collections: | Finance Working Papers
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