Immediate response to financial crises: A focus on US MNE subsidiaries

D. Dikova, R.A. Smeets, J.H. Garretsen, H. van Ees

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This paper provides evidence for the immediate or short-term responses to financial crises of US multinational firm (MNE) subsidiaries. Using a real options perspective, we hypothesize that financial crises change the relative value of ‘within-country’ versus ‘across-country’ options for MNE subsidiaries. We suggest that relocating subsidiary output is an effective short-term response to local financial crises. We examine the effects of 83 financial crises (banking, debt and currency crises) on longitudinal data of US MNEs’ subsidiary sales in over 50 countries in the period 1983–2005. Our results show marketswitching effects. Particularly in the case of local currency crises we observe a refocus of
the MNE’s subsidiary local sales toward export markets. The effect is maintained in the occurrence of twin financial crises. These results confirm our expectation that financial crises cause an increase in the value of ‘across-country’ option relative to ‘within-country’ option
Original languageEnglish
Pages (from-to)202 - 215
Number of pages14
JournalInternational Business Review
Issue number1
Publication statusPublished - 2013

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