 Corporate response to monetary policies: Do foreign subsidiaries and local firms behave differently?Jiarui Zhang, Yingying Shi and Lei Li Journal of International Money and Finance, 2025, vol. 154, issue C Abstract: Multinational companies (MNCs) have greater financial flexibility than local firms because they can access the international capital market at a lower cost. This may help reduce the financial constraint of their subsidiaries and therefore their dependence on local credit conditions. In this paper, we show that subsidiaries of MNCs are less affected by local monetary contraction than domestic firms in terms of investment. This effect is pronounced when foreign share of the subsidiary increases (willingness to help), if the parent firm comes from a financially more developed country (ability to help), or if the subsidiaries are operating in financially vulnerable industries (need for help). We find evidences that MNCs move financial resources across borders through equity transfer or trade credit provision to help their subsidiaries during host country’ monetary contraction periods. Keywords: Inward foreign direct investment; Monetary policy shocks; Internal capital market; Financial comparative advantage (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:154:y:2025:i:c:s0261560625000373 DOI: 10.1016/j.jimonfin.2025.103302 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
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