OPERATIONAL FLEXIBILITY AND MARKET VALUATION OF EARNINGS

摘要

This paper examines the association between the stock returns and accounting earnings of firms that have different levels of operational flexibility. Operational flexibility is a firm's abiltiy to respond profitably to environmental fluctuations by shifting factors of production within a multinational network of subsidiaries. The geographic breadth and depth of a firm's multinational network are used as indicators of ope4rational flexibility. We find a signficantly greater coefficient relating stock returns and accounting earnings for multinational firms that operate in many countries, but limit their concentrtion in any one foreign country, than for other multinational firms or domestic firms.