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International Trade, Multinational Activity, and Corporate Finance

Foley, CF; Manova, K; (2015) International Trade, Multinational Activity, and Corporate Finance. Annual Review of Economics , 7 (1) pp. 119-146. 10.1146/annurev-economics-080614-115453.

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An emerging new literature brings unique ideas from corporate finance to the study of international trade and investment. Insights about differences in the development of financial institutions across countries, the role of financial constraints, and the use of internal capital markets are proving central in understanding international economics. The ability to access financial capital to pay fixed and variable costs affects choices firms make regarding export entry and operations and, as a consequence, influences aggregate trade patterns. Financial frictions and the use of internal capital markets shape decisions that multinationals make regarding production locations, integration, and corporate governance. This article surveys this recent research with the goal of highlighting the main themes it explores, the key results it establishes, and the leading open questions it raises.

Type: Article
Title: International Trade, Multinational Activity, and Corporate Finance
DOI: 10.1146/annurev-economics-080614-115453
Publisher version: http://dx.doi.org/10.1146/annurev-economics-080614...
Language: English
Additional information: This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: International trade, multinational companies, foreign direct investment, financial frictions
URI: http://discovery.ucl.ac.uk/id/eprint/10043006
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