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The impact of international diversification on credit scores: Evidence from the UK / Hussein Halabi, Ahmad Alshehabi, Geoffrey Wood, Zaheer Khan, Godfred Afrifa

International Business Review, Volume: 30, Issue: 6, Start page: 101856

Swansea University Author: Hussein Halabi

  • Accepted Manuscript under embargo until: 30th October 2022

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 diversifica...

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Published in: International Business Review
ISSN: 0969-5931
Published: Elsevier BV 2021
Online Access: Check full text

URI: https://cronfa.swan.ac.uk/Record/cronfa56701
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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.
Keywords: International diversification; Credit score; Innovation; Competition; Exporting firm; SMEs
College: School of Management
Issue: 6
Start Page: 101856