Excess Market Value, the Multinational Corporation, and Tobin's q-Ratio

Abstract

The results of this study show that there is a positive and significant relationship between excess market value of multinational corporations and the degree of international involvement as measured by foreign sales percentage. However, the excess market value is not determined by the number of foreign subsidiaries, nor the interaction between foreign sales and the number of foreign subsidiaries. The relationship between excess market value and the two frequently used measures of monopoly power–concentration ratio and the Lerner Index–was also examined. This study found that the Lerner Index contributes significantly in explaining excess market value but concentration ratio does not. Furthermore, the positive and significant coefficients of advertising and R & D intensity serve as evidence that product market imperfections appear to play a bigger role in explaining the excess market value experienced by MNCs during our sample period.