IDEAS home Printed from https://ideas.repec.org/a/pal/jintbs/v19y1988i2p195-217.html
   My bibliography  Save this article

Multinational Corporations vs. Domestic Corporations: International Environmental Factors and Determinants of Capital Structure

Author

Listed:
  • Kwang Chul Lee

    (Institute for Communications Research)

  • Chuck C Y Kwok

    (University of South Carolina)

Abstract

This paper examines whether or not U.S.-based multinational corporations (MNCs) have different capital structures than U.S. domestic corporations (DCs) and if so, what causes the differences. In explaining the difference between the capital structures of MNCs and DCs, previous studies tended to directly discuss the relationships between international environmental factors (e.g., political risk, foreign exchange risk) and the capital structure. A framework of analysis is proposed in this paper that examines the influence of environmental factors on the firm-related capital structure determinants (e.g., agency costs, bankruptcy costs) that in turn affect the capital structure of the MNC. Among the determinants that are examined, more emphasis is placed on the discussion of agency costs since no previous studies have applied this concept in the international arena. Empirical tests were conducted to investigate whether MNCs are significantly different from DCs regarding agency costs of dept, bankruptcy costs, and capital structure. Contrary to conventional wisdom, the empirical findings show that MNCs do not have lower bankruptcy costs and that they tend to have lower debt ratios than DCs.© 1988 JIBS. Journal of International Business Studies (1988) 19, 195–217

Suggested Citation

  • Kwang Chul Lee & Chuck C Y Kwok, 1988. "Multinational Corporations vs. Domestic Corporations: International Environmental Factors and Determinants of Capital Structure," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 19(2), pages 195-217, June.
  • Handle: RePEc:pal:jintbs:v:19:y:1988:i:2:p:195-217
    as

    Download full text from publisher

    File URL: http://www.palgrave-journals.com/jibs/journal/v19/n2/pdf/8490381a.pdf
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: http://www.palgrave-journals.com/jibs/journal/v19/n2/full/8490381a.html
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:jintbs:v:19:y:1988:i:2:p:195-217. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: http://www.palgrave-journals.com/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.