Creditor Rights and Debt Allocation within Multinationals

Basak Akbel and Monika Schnitzer ()

Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems from Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich

Abstract: We analyze the optimal debt structure of multinational corporations choosing between centralized or decentralized borrowing. We identify how this choice is affected by creditor rights and bankruptcy costs, taking into account managerial incentives and coinsurance considerations. We find that partially centralized borrowing structures are optimal with either weak or strong creditor rights. For intermediate levels of creditor rights fully decentralized (centralized) borrowing structures are optimal if managers have strong (weak) empire building dencies. Decentralized borrowing is more attractive for companies focussing on short-term profitability. Credits are rather taken in countries with better creditor rights and more efficient insolvency systems.

Keywords: Multinational corporations; capital structure; creditor rights; coinsurance; internal capital markets (search for similar items in EconPapers)
JEL-codes: F23 G32 (search for similar items in EconPapers)
Date: 2009-11
New Economics Papers: this item is included in nep-cfn
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Creditor rights and debt allocation within multinationals (2011)
Working Paper: Creditor rights and debt allocation within multinationals (2011)
Working Paper: Creditor Rights and Debt Allocation within Multinationals (2010)
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