Do multinational and domestic corporations differ in their leverage policies? |
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| Institution: | 1. University of Economics in Bratislava, Dolnozemská cesta 1, 852 35 Bratislava, Slovakia;2. Institute of Economic Research, Hitotsubashi University, Naka 2-1, Kunitachi, Tokyo 186-8603, Japan;3. Institute of Economic Studies, Charles University, Opletalova 26, 110 00 Prague, Czech Republic;4. CESifo, Munich, and IOS, Regensburg, Germany;5. National Bank of Slovakia, Imricha Karva?a 1, 813 25 Bratislava, Slovakia;6. Institute of Financial Complex Systems, Masaryk University, Lipová 41a, 602 00 Brno, Czech Republic;1. Hanken School of Economics, P.O. Box 479, 00101 Helsinki, Finland;2. College of Business Administration, Florida International University, 11200 SW 8th St, Miami, FL 33199, USA |
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| Abstract: | This paper examines the leverage policies of multinational corporations (MNCs) in comparison to those of domestic corporations (DCs). Prior studies document that MNCs have lower leverage levels. However, our analysis of U.S. firms over the period 1981–2010 reveals that the leverage levels of MNCs are not significantly lower than those of DCs if we control for key firm characteristics related to leverage levels. We also find that MNCs and DCs do not differ significantly in terms of their debt maturity structure, the speed of leverage adjustments, or the propensity to issue debt vs. equity (or vs. not to issue debt). The results suggest that MNCs' financial policies at the corporate level are not significantly influenced by their greater exposures, in comparison to DCs, to market imperfections such as taxes and regulations. Interestingly, however, our additional analysis of MNCs from outside the U.S. reveals that non-U.S. MNCs issue securities more frequently and adjust leverage faster than their domestic peers. |
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