Review of Quantitative Finance and Accounting, 18: 119–138, 2002
2002 Kluwer Academic Publishers. Manufactured in The Netherlands.
The Valuation of MNC International Operations
During the 1990s
STEPHEN E. CHRISTOPHE
School of Management, MS 5F5, George Mason University, Fairfax, VA 22030
RAY J. PFEIFFER, JR.
Department of Accounting & Information Systems, Isenberg School of Management, University of
Massachusetts, Amherst, MA 01003 Tel.: (413) 545-5653, Fax: 545-3858
Abstract. We investigate how international operations affected ﬁrm value during the early 1990s. We also
investigate whether the disclosures of foreign operations in speciﬁc geographic regions under SFAS No. 14
provide investors with useful information beyond disclosure of aggregate foreign operations. We ﬁnd that in the
early 1990s, investors do not value international operations as highly as domestic operations, and that geographic
region disclosures are not useful for conveying information about the speciﬁc location and magnitude of the ﬁrm’s
operations. This latter ﬁnding supports the recent FASB decision that eliminated the requirement that ﬁrms break
out foreign operating statistics by geographic region.
Key words: multinational ﬁrm, international business, ﬁrm valuation, accounting information
JEL Classiﬁcation: F23
The purpose of this study is to investigate how international operations are reﬂected in
the value of U.S. multinational corporations (MNCs) during the 1990s. We use geographic
segment data reported by ﬁrms in their annual reports to shareholders to examine two related
issues: First, how do investors value aggregate foreign versus domestic operations during
the 1990s; and second, does the disclosure of foreign operations in speciﬁc geographic
regions provide investors with useful information above and beyond that contained in the
aggregate foreign operations disclosure.
These issues are of interest because there is presently some conﬂicting evidence con-
cerning the relationship between international operations and ﬁrm value. In addition, the
potential information content of geographic region disclosures is of interest as an ex post as-
sessment of recent disclosure requirement changes implemented by the Financial Account-
ing Standards Board (FASB) whereby SFAS No. 131 largely eliminated the geographic
disclosure requirements previously mandated under SFAS No. 14.
Address correspondence to: Stephen E. Christophe, School of Management, MS 5F5, George Mason University,
Fairfax, VA 22030, Tel.: (703) 993-1767; Fax: 993-1870. E-mail: email@example.com