BazEkon - The Main Library of the Cracow University of Economics

BazEkon home page

Main menu

Wyrobek Joanna (Cracow University of Economics, Poland), Lane Paul (Grand Valley State University)
Impact of Internationalization on the Capital Structure of Commercial Companies
Zeszyty Naukowe SGGW w Warszawie. Polityki Europejskie, Finanse i Marketing, 2019, nr 22 (71), s. 250-267, tab., bibliogr. 32 poz.
Scientific Journals Warsaw University of Life Sciences - SGGW. European Policies, Finance and Marketing
Spółki handlowe, Struktura kapitału, Finanse korporacji, Zadłużenie, Przedsiębiorstwo międzynarodowe
Commercial companies, Capital structure, Corporate finance, Indebtedness, International enterprise
JEL Classification: G32, C33, B17
International enterprises (in this paper, international companies are understood as companies that sell their products and services abroad) are precious for the national economy because, through their experience in international sales, they stimulate the development of other companies in the same industry and their subcontractors. The knowledge that these companies have gained on international markets through the spillover effect spreads on their suppliers, as well as through imitation or cooperation on their competitors. Also, international companies (in the meaning: domestic export companies) are often the first to use new technological solutions and product innovations, which contributes to the modernization of products in the entire business sector. Dynamic and robust international companies usually also build networks with entities from different countries in order to cooperate on development, negotiation, and sales, which also encourages similar activities of their competitors. For all these reasons, national governments should take action to help to export companies, or at least monitor the problems that such entities report. The purpose of the publication is to draw attention to the higher demand for the debt that exists in such enterprises and to discuss the reasons for this. In particular, the purpose of the publication was to verify 2 research hypotheses: H1: Internationalization increases indebtedness of a company measured with the debt to equity ratio, and H2: The scale of internationalization (measured with the share of foreign sales to total sales) is positively related to the level of indebtedness (measured with the debt to equity ratio). For both hypotheses we found no grounds to reject these hypotheses. In the opinion of the authors, the demand for debt from exporters should be monitored, especially in terms of the availability of this form of financing for exporters from the SME sector. The paper used the Arellano-Bond model and data downloaded from the Orbis database for years 2007 - 2017. (original abstract)
Full text
  1. Agmon T., Lessard D.R.: Investor Recognition of Corporate International Diversification, Journal of Finance, 32(4)/1977, pp. 1049-55,
  2. Black, F.: International Capital Market Equilibrium with Investment Barriers, Journal of Financial Economics 1, 1974, pp. 337-352.
  3. Burgman T. A.: An Empirical Examination of Multinational Corporate Capital Structure, Journal of International Business Studies, 27(3)/1996, pp. 553-570.
  4. Chen C. J. P., Cheng C. S. A., He, J., Kim, J.: An Investigation of the Relationship between International Activities and Capital Structure, Journal of International Business Studies, 28(3)/1997, pp. 563-577.
  5. Chkir I. E. , Cosset J. C.: Diversification strategy and capital structure of multinational corporations, Journal of Multinational Financial Management 11/2001, pp.17-37.
  6. Doukas J. A., Pantzalis C.: Geographic diversification and agency costs of debt of multinational firms, Journal of Corporate Finance 9/2003, pp.59-92.
  7. Errunza, V. R., Senbet L.W.: The Effect of International Operations on the Market Value of the Firm: Theory and Evidence, Journal of Finance 36/1981, pp. 401-417.
  8. Ethier W.J.: The Multinational Firm, Quarterly Journal of Economics 101/1996, pp. 805-834.
  9. Fatemi A. M.: The Effect of International Diversification on Corporate Financing Policy, Journal of Business Research, 16(1)/1988, pp. 17-30.
  10. Heston PP.L., Rouwenhorst K.G.: Does Industrial Structure Explain the Benefits of International Diversification?, Journal of Financial Economics 36/1994, pp. 3-27.
  11. Jensen M., Meckling W.: Theory of the firm: Managerial behavior, agency costs, and capital structure, Journal of Financial Economics, 3/1976, pp. 305-360.
  12. Jensen M.C.: Agency Costs of Free Cash Flow, Corporate Finance and Takeovers, The American Economic Review, 76(2)/1986, May 1986, pp. 321-349.
  13. Kedia PP., Mozumdar A.: Foreign Currency Denominated Debt: An Empirical Examination, Journal of Business, 76(4)/2003, pp. 521-546.
  14. Kim W.S., Lyn E.O.: Foreign direct investment theories, entry barriers, and reverse investments in US manufacturing industries, Journal of International Business Studies, 18(2)/1987, pp. 53-67.
  15. Kwok C. C. Y., Reeb, D. M.: Internationalization and Firm Risk: An Upstream-Downstream Hypothesis, Journal of International Business Studies, 31(4)/2000, pp. 611-629.
  16. Lee K. C., Kwok C. C. Y.: Multinational Corporations vpp. Domestic Corporations: International Environmental Factors and Determinants of Capital Structure, Journal of International Business Studies, 19(2)/1988, pp. 195-217.
  17. Lee, M. H., Zechner J.: Debt, Taxes, and International Equilibrium, Journal of International Money and Finance 3/1984, pp. 343-355.
  18. Lewellen W.G.: A Pure Financial Rationale for the Conglomerate Merger, Journal of Finance 26/1971, pp. 521-537.
  19. Low P. Y., Chen K. H.: Diversification and Capital Structure: Some International Evidence, Review of Quantitative Finance and Accounting, 23(1)/2004, pp. 55-71.
  20. Mansi, PP.A., Reeb D.M.: Corporate diversification: what gets discounted?, Journal of Finance 57/2002, pp. 2167-2183.
  21. Michel A., Shaked I.: Multinational Corporations vs. Domestic Corporations: Financial Performance and Characteristics, Journal of International Business Studies, 17(3)/1986, pp. 89-100.
  22. Modigliani F., Miller M.: The Cost of Capital, Corporation Finance and the Theory of Investment American ', Economic Review 48/1958, pp. 261-297.
  23. Myers PP. C., Determinants of Corporate Borrowing, Journal of Financial Economics 5/1977, pp. 147-175.
  24. Reeb D.M., Mansi PP.A., Allee J.M.: Firm Internationalization and the Cost of Debt Financing: Evidence from Non-Provisional Publicly Traded Debt, Journal of Financial and Quantitative Analysis 36/2001, pp. 395-414.
  25. Senbet, L. W.: International Capital Market Equilibrium and Multinational Firm Financing and Invest Policies, Journal of Financial and Quantitative Analysis 14/1979, pp.455-480.
  26. Shaked I.: Are Multinational Corporations Safer? Journal of International Business Studies spring/2986, pp. 83-101.
  27. Shapiro A. C.: Financial Structure and Cost of Capital in the Multinational Corporation, Journal of Financial and Quantitative Analysis, 13(2)/1978, pp. 211-226.
  28. Singh M., Davidson W.N., Suchard J.: Corporate Diversification Strategies and Capital Structure, Quarterly Review of Economics and Finance 43/2003, pp. 147-167.
  29. Singh M., Nejadmalayeri A.: Internationalization, Capital Structure, and Cost of Capital: Evidence from French Corporations, Journal of Multinational Financial Management 14/2004, pp. 153-169.
  30. Stiglitz J. E.: A Re-Examination of the Modigliani-Miller Theorem, American Economic Review 59/1969, pp. 784-793.
  31. Stulz R.: Managerial discretion and optimal financing policies, Journal of Financial Economics 26/1990, pp. 3-27.
Cited by
Share on Facebook Share on Twitter Share on Google+ Share on Pinterest Share on LinkedIn Wyślij znajomemu