Impact of multi-nationality on the value creation of publicly listed companies

Abstract

A company s main objective is creating shareholder value. International expansion is a strategy employed by companies in pursuit of growth and value creation. South Africa has been characterised by economic growth lower than the rest of Africa and developed countries. This trend is expected to continue into the foreseeable future. Internationalisation becomes imperative for companies seeking growth and value creation. The objective was to investigate the impact of multinationality on value creation of multinational companies from South Africa. Geographic location and the degree of internationalisation were considered. Previous studies focussed on developed country multinationals, while this research study focused on South African multinationals to provide an emerging market perspective. Generalised linear models with fixed effects and t-tests were conducted to measure the effect multinationality, geographic location and degree of multinationality has on the return of shareholders funds and market capitalisation. Market capitalisation demonstrated statistically significant results when tested against multinationality, degree of internationalisation and geographic location. However the effect of geographic location on market capitalisation was negative. Return on shareholders funds had statistically significant results with negative effects when tested against multinationality and exhibited no significance with geographic location of investment and degree of internationalisation. Multinationality, geographic location and the degree of internationalisation do affect company value creation.