Multinational Diversification and Corporate Performance: Evidence from European Firms


  • We thank the editor John Doukas, an anonymous referee, and participants at the 2001 Financial Management Association and the 2002 Eastern Finance Association for their helpful comments that have improved the quality of the paper.


We investigate the empirical relationship between accounting based measures of performance and the degree of multinational diversification for a set of European chemical industry firms. We find that for these firms, the degree of multinational diversification is strongly related to superior financial performance. The results hold for each of the three sample years. The findings suggest that multinational firms outperform purely domestic and exporting firms. The results provide strong support for gains from multinational diversification. The results indicate that while greater European unification may have eroded potential benefits of exploiting international capital and product market imperfections, the benefits of firm specific economies of scope and scale as well as managerial and financial synergies are still realised through exports.