We study how non-financial multinational companies propagate economic declines from their subsidiaries located in countries experiencing an economic downturn to subsidiaries in countries not experiencing one. We find that investment is 18% lower in subsidiaries of these parents relative to the...

We investigate whether the Great Recession induced a “flight home” effect in internal capital markets of European multinational firms. Using a difference-in-difference approach, we find a significant reduction in group borrowings by subsidiaries of European multinationals in Italy since...