The impact of international diversification on credit scores: Evidence from the UK

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. 10.1016/j.ibusrev.2021.101856

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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.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Publisher:	Elsevier
ISSN:	0969-5931
Date of First Compliant Deposit:	18 November 2022
Date of Acceptance:	18 April 2021
Last Modified:	08 Nov 2023 05:27
URI:	https://orca.cardiff.ac.uk/id/eprint/154163

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