개별기업의 국제다각화가 자기자본비용에 미치는 영향: 한국기업을 중심으로

This paper examines the potential effect of corporate international diversification on cost of equity capital for Korean firms. Corporate international diversification is defined as a firm’s strategy by which a firm conducts its businesses in multiple countries at the same time. In an ex-ante sense, more internationally diversified firms may decrease their cost of equity capital through reduced volatility of future cash flows and/or reducing more effectively unsystematic risks by investing into various countries. However, it is also possible that cost of equity capital of more internationally diversified firms may increase since they will be exposed to greater foreign exchange translation risks or political risks of other countries and/or since they may have higher agency costs for their controls of managers located out of their home country of domicile. By using 755 Korean firm/year observations between 2000 and 2005, we find that the level of corporate international diversification, which is measured by the relative ratio of overseas sales (or assets) to total sales (or assets), is positively associated with ex-ante cost of equity capital, which is proxied for by implied cost of equity capital derived from equity valuation model, even after well-known risk proxies are controlled for. Thus, we conclude that more internationally diversified Korean firms increase their cost of equity capital. This is the first study to examine the effect of corporate international diversification on cost of equity capital for Korean firms. We believe that our empirical evidence may shed some lights on our understanding of the potential effect of corporate international diversification on various aspects of firms.