Although international expansion often enables firms to enhance their existing businesses, extant studies have not fully explained the drivers of international expansion success. Underpinning the belief that changes in a firm’s market value in response to an international expansion reflect the anticipated changes in the firm’s future expected cash flows resulting from this expansion, the author attempts to develop a theoretical model that may explain the effects of a firm’s international diversification on its market value creation and the moderating roles of the host-market type and the firm’s expansion strategy. The model is empirically tested using a sample of 253 international expansion announcements of firms listed in the Fortune Global 500 for the period between 2006 and 2015. Using an event study method and a linear modeling technique, the author finds that the international diversification of large international firms positively affects market value creation and that international expansions do not equally affect the market value across firms and markets. This manuscript is concluded with a discussion of important implications regarding theoretical and managerial contributions and research limitations some of which suggest plausible avenues for future research.
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