The impact of international diversification on credit scores: Evidence from the UK

Hussein Halabi, Ahmad Alshehabi, Geoffrey Wood, Zaheer Khan, Godfred Afrifa

Research output: Contribution to journalArticlepeer-review

1 Citation (SciVal)

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.

Original languageEnglish
Article number101856
JournalInternational Business Review
Volume30
Issue number6
DOIs
Publication statusPublished - 31 Dec 2021

Keywords

  • Competition
  • Credit score
  • Exporting firm
  • Innovation
  • International diversification
  • SMEs

ASJC Scopus subject areas

  • Business and International Management
  • Finance
  • Marketing

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