Internationalization, capital structure, and cost of capital

Evidence from French corporations

Manohar Singh, Ali Nejadmalayeri

Research output: Contribution to journalArticle

37 Citations (Scopus)

Abstract

The paper examines the relationship between international diversification, financial structure, and their individual and interactive implications for the combined debt and equity cost of capital for a sample of French corporation. We report that the degree of international diversification positively associates with higher total and long-term debt ratios. Our evidence suggests a non-linear inverted U-shape relationship between the degree of international diversification and short term debt financing. We also find that internationally diversified firms support higher level of debt financing that directly results in reduction of overall cost of capital despite higher equity risk. More significantly, we find that even after controlling for the effects of the degree and composition of debt financing, equity risk, firm size, managerial agency costs, and asset structure, higher degree of international diversification results in lower overall-combined debt and equity-cost of capital.

Original languageEnglish (US)
Pages (from-to)153-169
Number of pages17
JournalJournal of Multinational Financial Management
Volume14
Issue number2
DOIs
StatePublished - Apr 1 2004

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Capital structure
Capital cost
Cost of capital
International diversification
Internationalization
Debt financing
Cost of equity capital
Debt
Equity risk
Assets
Long-term debt
Short-term debt
Diversified firms
Agency costs
Financial structure
Inverted-U
Firm size
Debt ratio

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

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Internationalization, capital structure, and cost of capital : Evidence from French corporations. / Singh, Manohar; Nejadmalayeri, Ali.

In: Journal of Multinational Financial Management, Vol. 14, No. 2, 01.04.2004, p. 153-169.

Research output: Contribution to journalArticle

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