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Determinants of Capital Structure for Japanese Multinational and Domestic Corporationsn
SHUMI AKHTAR AND BARRY OLIVER
School of Finance and Applied Statistics, Faculty of Economics and Commerce,
Australian National University, Canberra, Australia
ABSTRACT
Our study examines whether there are systematic differences in standard
leverage determinants for a sample of Japanese multinational (MNCs) and
domestic corporations (DCs). We find that on a univariate basis Japanese
MNCs differ significantly on most variables relative to Japanese DCs. These
variables include leverage, age, collateral value of assets, free cash flows,
foreign exchange risks, growth, non-debt tax shields, political risks, profitability
and size. Business risks are not found to be significantly different
between the two groups of organizations. When modeling capital structure
and the determinants of capital structure we find that Japanese multinationals
have significantly less leverage than Japanese DCs, and that
multinationality is an important aspect of leverage for Japanese firms. We
find that business risks are not significant for modeling capital structure of
domestic firms but they are for multinationals and foreign exchange risks are
not significant for multinationals but are significant for domestic firms.
Business risks are negatively related to leverage for multinationals and we
document that significant positive leverage effects of foreign exchange risks
and size are subsumed by the negative effect of business risks to explain the
lower leverage experienced by Japanese multinationals relative to Japanese
DCs. The lack of significance of foreign exchange risks for DCs can be
explained by economies of scale in risk management, such as derivatives.
Domestic firms seem to manage increased foreign exchange risks through
lower leverage rather than derivative use. On the other hand, the larger
multinationals can take advantage of economies of scale in risk management.
Consequently, foreign exchange risks of multinationals can be
managed through derivatives and other risk management operations and
not reduced leverage.
I. INTRODUCTION
Corporate capital structure remains a controversial issue in modern corporate
finance. Since the seminal work by Modigliani and Miller (1958), a plethora of
n Special thanks to Tom Smith, participants at the 2005 AFAANZ conference and Bruce
Grundy (editor) for comments and suggestions on earlier drafts.
r2009 The Authors. Journal compilationrInternational Review of Finance Ltd. 2009. Published by Blackwell
Publishing Ltd., 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
International Review of Finance, 9:1–2, 2009: pp. 1–26
DOI: 10.1111/j.1468-2443.2009.01083.x
research has been undertaken in attempting to identify the determinants of
capital structure. This research has resulted in a variety of different theories that
predict why firms have a particular capital structure. Support for one theory
over another has been determined by empirical evidence. However, one area
that has received only little attention is whether multinational corporations
(MNCs) differ in capital structure and capital structure determinants relative to
domestic corporations (DCs).1 In the majority of empirical research no
distinction is made between these two different forms of corporations.本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。