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The capital structure of multinational corporations: Canadian versus U.S. evidence

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  • Mittoo, Usha R.
  • Zhang, Zhou
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    Abstract

    Contrary to the U.S. evidence, we show that Canadian multinational corporations (MNCs) display higher leverage than domestic firms (DCs). This higher leverage is due to lower agency costs of debt associated with MNCs' U.S. operations. We also find that the Canadian firms with international bond market access have higher leverage than firms without such access. Comparison with a U.S. matched sample shows that the sensitivity of leverage to firm-specific factors differs between the two countries, especially for the MNCs samples. Our evidence indicates that capital structures of MNCs are a complex interaction of both home and host country factors and differences in leverage determinants across countries.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 14 (2008)
    Issue (Month): 5 (December)
    Pages: 706-720

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    Handle: RePEc:eee:corfin:v:14:y:2008:i:5:p:706-720

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    Web page: http://www.elsevier.com/locate/jcorpfin

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    Keywords: Capital structure Multinational corporations Canada;

    References

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    Cited by:
    1. Ramirez, Andres & Kwok, Chuck C.Y., 2010. "Settling the debate on multinational capital structure using the CEPR measure," Journal of Multinational Financial Management, Elsevier, Elsevier, vol. 20(4-5), pages 251-271, December.
    2. Oxelheim, Lars & Randoy, Trond & Stonehill, Arthur, 2011. "What Can International Finance Add to International Strategy?," Working Paper Series, Research Institute of Industrial Economics 888, Research Institute of Industrial Economics.
    3. Keshari, Pradeep Kumar, 2013. "Comparative performance of foreign affiliates and domestic firms in the Indian machinery industry," MPRA Paper 33076, University Library of Munich, Germany, revised 20 Apr 2013.
    4. Karampatsas, Nikolaos & Petmezas, Dimitris & Travlos, Nickolaos G., 2014. "Credit ratings and the choice of payment method in mergers and acquisitions," Journal of Corporate Finance, Elsevier, Elsevier, vol. 25(C), pages 474-493.
    5. Mari Avarmaa & Aaro Hazak & Kadri Männasoo, 2011. "Capital structure formation in multinational and local companies in the Baltic States," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 11(1), pages 125-146, July.
    6. Koziol, Christian & Lawrenz, Jochen, 2010. "Optimal design of rating-trigger step-up bonds: Agency conflicts versus asymmetric information," Journal of Corporate Finance, Elsevier, Elsevier, vol. 16(2), pages 182-204, April.

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