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Title: Market recognition of multinationals international diversification
Author: Zahid, Md Jawadur Rahim
Awarding Body: University of Manchester
Current Institution: University of Manchester
Date of Award: 1997
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This study is concerned to examine the relationship between the geographical diversification of a company's production facilities and the pricing of its shares by the investors. The purpose is to establish whether multinational company (mnc) shares are priced differently from domestic company shares. The objective of ,the research is to find empirical evidence in UK that investing in multinational company shares provide investors with international diversification compared to investing in domestic company shares. The main four specific questions investigated are: 1. Does a portfolio of multinational company shares give more diversification benefit than a portfolio of domestic company shares? 2. Does the stock market price domestic company shares and multinational company shares in two segmented markets? 3. Do domestic company shares have different sources of systematic risk compared with multinational company shares? 4. Do market players i.e., investors use multinational company shares as a vehicle of international diversification? The research questions are investigated through the theoretical framework of equilibrium asset pricing models - CAPM and APT and through a questionnaire survey of a sample of portfolio managers. Comparison of systematic risk (beta), risk-adjusted return (return/beta) and risk premium (market return over risk-free return) of large objective comprehensive samples of UK multinational companies and domestic companies over the period 1978 to 1992 found no evidence that multinational company shares generate any benefits of diversification for their shareholder above that provided by domestic company shares. There is no market segmentation in pricing the domestic and multinational company shares and they have similar structure of systematic risk factors. Majority (63%) of the surveyed portfolio managers do not use multinational company shares to diversify their portfolios internationally. Therefore, the conclusion is that the market does not recognise UK multinationals as a vehicle of international diversification. In fact, European integration has made UK multinational companies with only European subsidiaries equivalent to pure uK' domestic companies.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available