Globalization and the Reach of Multinationals Implications for Portfolio Exposures, Capital Flows, and Home Bias

Authors

  • Carol Bertaut Federal Reserve Board
  • Beau Bressler University of California, Davis
  • Stephanie Curcuru Federal Reserve Board

DOI:

https://doi.org/10.33423/jaf.v21i5.4738

Keywords:

accounting, finance, balance of payments, capital flows, financial globalization, foreign assets, international financial data, home bias

Abstract

The growing use of low-tax jurisdictions as locations for firm headquarters, proliferation of offshore financing vehicles, and growing size, number, and geographic diversity of multinational firms have clouded the view of capital flows and investor exposures from standard sources such as the IMF Balance of Payments and the Coordinated Portfolio Investment Survey. We use detailed, security-level information on U.S. cross-border portfolio investment to uncover the extent of distortions in the official U.S. statistics. We find that nearly a third of U.S. cross border portfolio investment is allocated to a country different from its primary economic exposure by standard reporting conventions. About one-fourth of the stock of global cross-border portfolio investment is similarly distorted, with exposures to emerging markets likely understated by about a third. Estimates of the international exposures of U.S. investors are even larger when we distribute exposure according to the geographic distributions of firm-level sales. Our results have implications for conclusions we draw about the factors influencing capital flows, in particular those to emerging markets.

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Published

2021-11-18

How to Cite

Bertaut, C., Bressler, B., & Curcuru, S. (2021). Globalization and the Reach of Multinationals Implications for Portfolio Exposures, Capital Flows, and Home Bias. Journal of Accounting and Finance, 21(5). https://doi.org/10.33423/jaf.v21i5.4738

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Section

Articles