Capital structure norms among foreign subsidiaries of U.S. multinational enterprises

Abstract

Although a number of studies have examined the topic of international capital structure, the literature has generally provided mixed-results regarding the determinants of capital structure. This study adopts a unique approach to this topic by collecting and analyzing primary data on the capital structure decisions made by 158 foreign subsidiaries of U.S.-based multinational enterprises. An examination is conducted on the effects of four factors that may influence the foreign subsidiary manager's capital structure decision: firm size, industry, parent company, and host country characteristics. The results indicate that the foreign subsidiary's capital structure is influenced by host country and parent company capital structure. Neither industry classification nor firm size has a significant influence on the foreign subsidiary's capital structure.