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Corporate International Activity and Debt Financing

Author

Listed:
  • Sattar A Mansi

    (Texas University)

  • David M Reeb

    (American University)

Abstract

The literature provides conflicting evidence on the relation between corporate international activity and the cost and level of debt financing. Based on this evidence, we explore the impact of firm internationalization on debt financing. Using a market based sample of U.S. firms, we find significant evidence of a non monotonic relation between firm international activity and both the cost and level of debt financing. Specifically, we find that, contrary to prior research, firm international activity is, on average, associated with a 13% reduction in the cost of debt financing and a 30% increase in firm leverage.© 2002 JIBS. Journal of International Business Studies (2002) 33, 129–147

Suggested Citation

  • Sattar A Mansi & David M Reeb, 2002. "Corporate International Activity and Debt Financing," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(1), pages 129-147, March.
  • Handle: RePEc:pal:jintbs:v:33:y:2002:i:1:p:129-147
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    Citations

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    Cited by:

    1. Ramírez, Andrés & Tadesse, Solomon, 2009. "Corporate cash holdings, uncertainty avoidance, and the multinationality of firms," International Business Review, Elsevier, vol. 18(4), pages 387-403, August.
    2. Mohammad M Rahaman, 2016. "Chinese import competition and the provisions for external debt financing in the US," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(8), pages 898-928, October.
    3. Joliet, Robert & Muller, Aline, 2013. "Capital structure effects of international expansion," Journal of Multinational Financial Management, Elsevier, vol. 23(5), pages 375-393.
    4. Park, Soon Hong & Suh, Jungwon & Yeung, Bernard, 2013. "Do multinational and domestic corporations differ in their leverage policies?," Journal of Corporate Finance, Elsevier, vol. 20(C), pages 115-139.
    5. Chung, Chris Changwha & Lee, Seung-Hyun & Beamish, Paul W. & Southam, Colette & Nam, Daeil (Dale), 2013. "Pitting real options theory against risk diversification theory: International diversification and joint ownership control in economic crisis," Journal of World Business, Elsevier, vol. 48(1), pages 122-136.
    6. Kayo, Eduardo K. & Kimura, Herbert, 2011. "Hierarchical determinants of capital structure," Journal of Banking & Finance, Elsevier, vol. 35(2), pages 358-371, February.
    7. Ivan E. Brick & Rose C. Liao, 2017. "The joint determinants of cash holdings and debt maturity: the case for financial constraints," Review of Quantitative Finance and Accounting, Springer, vol. 48(3), pages 597-641, April.
    8. Ge, Wenxia & Kim, Jeong-Bon & Li, Tiemei & Li, Yutao, 2016. "Offshore operations and bank loan contracting: Evidence from firms that set up subsidiaries in offshore financial centers," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 335-355.
    9. repec:cuf:journl:y:2017:v:18:i:1:agyei-boapeah is not listed on IDEAS
    10. Ramirez, Andres & Kwok, Chuck C.Y., 2010. "Settling the debate on multinational capital structure using the CEPR measure," Journal of Multinational Financial Management, Elsevier, vol. 20(4-5), pages 251-271, December.
    11. Müllner, Jakob, 2016. "From uncertainty to risk—A risk management framework for market entry," Journal of World Business, Elsevier, vol. 51(5), pages 800-814.
    12. Alan M. Rugman & Chang Hoon Oh, 2011. "Multinational Enterprises and Regional Economic Integration: Rethinking Key Metrics in International Business," Chapters,in: International Handbook on the Economics of Integration, Volume III, chapter 4 Edward Elgar Publishing.
    13. Lindner, Thomas & Muellner, Jakob & Puck, Jonas, 2016. "Cost of Capital in an International Context: Institutional Distance, Quality, and Dynamics," Journal of International Management, Elsevier, vol. 22(3), pages 234-248.

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