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How does internationalization affect capital raising decisions? Evidence from UK firms

Edward Jones, Nana Abena Kwansa and Hao Li

Journal of Multinational Financial Management, 2020, vol. 57-58

Abstract: Comparisons of financing decisions of domestic and multinational firms provide contrasting results. Some indicate that multinationals operate at higher levels of debt, whilst others suggest domestic firms use more leverage. We test whether managers of multinational firms increase the use of debt capital or prefer theoretically more expensive equity financing as internationalization increases. We find that multinational companies use similar or lower leverage than domestic firms and are more likely to raise new equity capital than new debt. Our evidence indicates that internationalization leads to the use of more expensive capital from the domestic market at a cost to shareholders. International markets are used sparingly.

Keywords: Multinational; Capital structure; Internationalization; Capital raising (search for similar items in EconPapers)
JEL-codes: G32 G34 F23 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.mulfin.2020.100652

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Journal of Multinational Financial Management is currently edited by I. Mathur and G. G. Booth

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