| In my research, I examine whether U.S.-based multinational corporations (MNCs) or U.S. domestic corporations (DCs) have lower cost of capital (weighted average cost of debt and cost of equity), and whether MNCs or DCs have higher management efficiency, which is evaluated by return on capital. In addition, I study if MNCs and DCs are optimizing their investment decisions. My study shows that MNCs have both lower cost of capital and lower return on capital. This conclusion holds no matter I use discrete or continuous study approach to conduct my study. The result about cost of capital shows that risk-decreasing factors dominate risk-increasing factors for MNCs. Since the return on capital is lower for MNCs, MNCs have lower management efficiency. This lower management efficiency appears to be caused by increased communication difficulties due to culture and language difference, and increased exchange risk and political risk on MNCs' operation. As for investment decision-making optimization issue, my finding demonstrates that MNCs overinvest, while DCs underinvest. |
