THE ASSOCIATION BETWEEN SYSTEMATIC RISK AND MULTINATIONALITY: A GROWTH OPPORTUNITIES PERSPECTIVE

This study analyzes the association between multinationality and systematic risk as measured by the market model beta. Unlike previous studies the results of this study suggest that systematic risk is positively related to the level of multinationality after controlling for corporate reputation and other factors known to be associated with systematic risk. The difference with previous studies is due to a consideration of growth opportunities as measured by the investment opportunity set. While systematic risk is negatively related to multinationality for high investment opportunity set firms, it is positively related to multinationality for low investment opportunity firms.