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Whether the international diversification of large Russian companies influences standard of profitability demanded by investors

Vol. 18, Iss. 44, NOVEMBER 2012

Available online: 27 November 2012

Subject Heading: Investment activity

JEL Classification: 

Shcherbakov D.Y. Graduate Student of department "Economics and Finance of a Firm", the National Research University - the Higher School of Economics
dm.shcherbakov@gmail.com

In the article it is noted that the Russian companies actively diversify the international structure of business, entering the markets of the CIS and foreign countries. However effectiveness of international diversification in some cases is questionable. The majority of the academic researches testifies that the international diversification of the companies with developed and emerging markets reduces profitability of business. Influence of internationalization on the alternative cost of the capital defined as the average expenses for the enclosed capital (WACC), remains insufficiently studied area. The approach to an assessment of influence of internationalization on the average costs of the capital is offered. It is shown that dependence of WACC on level of the international diversification wears a U-return uniform, and the companies with the international structure of business are characterized by higher risk level.

Keywords: corporate international diversification, business efficiency, multinational corporations, weighted average cost of capital

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ISSN 2311-8709 (Online)
ISSN 2071-4688 (Print)

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