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The Relationship Between Internationalization And Capital Structures Of Taiwan Firms

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  • Yi-Chein Chiang
  • Sheng-Wei Chen

Abstract

Using a sample of Taiwan firms over the period of 2001 to 2005, this study investigates the relationship between internationalization and a firm’s capital structure, measured by the leverage ratio. Univariate tests show that multinational corporations (MNCs) are significantly less leveraged than domestic corporations (DCs). In addition, MNCs have lower business risks, lower exchange rate risks and higher agency costs, and are more profitable than DCs. The results of multivariate regressions show that some threshold of internationalization exists. The degree of internationalization is negatively associated with a firm’s leverage ratio only before this threshold, and there will be a positive relationship beyond this threshold.

Suggested Citation

  • Yi-Chein Chiang & Sheng-Wei Chen, 2008. "The Relationship Between Internationalization And Capital Structures Of Taiwan Firms," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 2(1), pages 1-12.
    • Handle: RePEc:ibf:ijbfre:v:2:y:2008:i:1:p:1-12
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    Citations

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    Cited by:

    1. Chen, Hsiang-Lan & Hsu, Wen-Tsung & Chang, Chiao-Yi, 2016. "Independent directors’ human and social capital, firm internationalization and performance implications: An integrated agency-resource dependence view," International Business Review, Elsevier, vol. 25(4), pages 859-871.
    2. Lindner, Thomas & Klein, Florian & Schmidt, Stefan, 2018. "The effect of internationalization on firm capital structure: A meta-analysis and exploration of institutional contingencies," International Business Review, Elsevier, vol. 27(6), pages 1238-1249.

    More about this item

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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