Multinational firms would most likely be
A) riskier than purely domestic firms because of the exposures of operating abroad
B) less risky than purely domestic firms because of international diversification
C) less risky than domestic firms if the added risks of operating overseas are more than offset by the ability to operate in nations whose economic cycles are not perfectly in phase
D) invested in developed countries only and avoid developing economies

Question

Quizplus · Accepted Answer

Multinational firms may face added risks of operating abroad compared to purely domestic firms. However, international diversification may also reduce overall risk. Additionally, being able to operate in nations whose economic cycles are not perfectly in phase can also offset the risks of operating overseas. Therefore, multinational firms may be less risky than domestic firms if the benefits of international diversification and operating in different economic cycles outweigh the added risks of operating abroad. The statement that multinational firms only invest in developed countries and avoid developing economies is inaccurate as many multinational firms operate in both developed and developing economies.

Multinational Firms Would Most Likely Be