Capital Structure Choice of Multinational Corporations

This paper contributes to the literature on the capital structure of multinational corporations in different countries. The research is based upon an empirical model that separates the influence of various factors on the target capital structure and makes possible to make an inference on the effect of presence in the multiple countries. The presence in different countries makes the organizational structure more complex and exposes the business to more risk factors, which in some cases may increase the cost of debt and make the monitoring costs higher, thus reducing the leverage a firm can use. There is also a process of diversification with an opposite influence and additional opportunities to access the capital markets, which in some cases may outweigh the negative leverage impact. Most recent research papers explored the topic based on the data from developed countries and found out that the multinational status either makes the leverage lower or does not have any influence whatsoever. In our research, we focused on testing their results and comparing to the data from developing countries. Our research is structured in 3 chapters: in the first one, we highlight the main research attempts and fundamental works they were based on. In the second one, we formulate the regression model and factors that are used in the analysis. Finally, we test the data using the empirical models and test our hypotheses. We have defined the multinational corporations based on the abroad revenue share, and showed that these companies have a lower leverage than their local peers in the developed countries and in some of the developing countries with an exception for Brazil. In our work, we also tested the organizational complexity proxy and concluded that it does not explain the leverage difference for multinational companies. In addition, we provide evidence that there is an inverse relationship between the leverage impact and the capital structure adjustment speed impact.