The impact of international diversification on credit scores: evidence from the UK
The impact of international diversification on credit scores: evidence from the UK
Despite the great deal of previous research into international diversification, we know little about the impact of international diversification on firms’ credit scores. Drawing upon the resource-based view and transaction cost economics, we examine the relationship between international diversification and credit scores by using a large sample of 6,557 UK firms between 2016 and 2017. We find an inverted U-shaped relationship between international diversification and firms’ credit scores, indicating that the effect of international diversification on credit scores is initially positive but becomes negative with over-diversification. In addition, we find that R&D intensity positively moderates the relationship between international diversification and credit score, implying that the credit scores of highly diversified firms improve as they increase their investment in R&D. Further analysis suggests that a firm’s credit score becomes less dependent on international diversification for large firms, firms in concentrated industries, firms in the manufacturing sector, and firms distant from key metropolitan areas, such as London.
Halabi, Hussein
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Alshehabi, Ahmad
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Wood, Geoffrey
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Khan, Zaheer
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Afrifa, Godfred
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29 September 2021
Halabi, Hussein
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Alshehabi, Ahmad
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Wood, Geoffrey
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Khan, Zaheer
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Afrifa, Godfred
14b02412-0197-4418-a9d2-dd933693307e
Halabi, Hussein, Alshehabi, Ahmad, Wood, Geoffrey, Khan, Zaheer and Afrifa, Godfred
(2021)
The impact of international diversification on credit scores: evidence from the UK.
International Business Review, 30 (6), [101856].
(doi:10.1016/j.ibusrev.2021.101856).
Abstract
Despite the great deal of previous research into international diversification, we know little about the impact of international diversification on firms’ credit scores. Drawing upon the resource-based view and transaction cost economics, we examine the relationship between international diversification and credit scores by using a large sample of 6,557 UK firms between 2016 and 2017. We find an inverted U-shaped relationship between international diversification and firms’ credit scores, indicating that the effect of international diversification on credit scores is initially positive but becomes negative with over-diversification. In addition, we find that R&D intensity positively moderates the relationship between international diversification and credit score, implying that the credit scores of highly diversified firms improve as they increase their investment in R&D. Further analysis suggests that a firm’s credit score becomes less dependent on international diversification for large firms, firms in concentrated industries, firms in the manufacturing sector, and firms distant from key metropolitan areas, such as London.
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Accepted/In Press date: 18 April 2021
e-pub ahead of print date: 30 April 2021
Published date: 29 September 2021
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Local EPrints ID: 478314
URI: http://eprints.soton.ac.uk/id/eprint/478314
ISSN: 0969-5931
PURE UUID: 488fa370-ac90-4f85-9f5b-873805d3511c
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Date deposited: 27 Jun 2023 17:31
Last modified: 18 Apr 2024 04:01
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Author:
Hussein Halabi
Author:
Ahmad Alshehabi
Author:
Geoffrey Wood
Author:
Zaheer Khan
Author:
Godfred Afrifa
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