- Title Pages
- Acknowledgments
- Contributors
- 1 International Finance: An Overview
- 2 A Primer on Exchange Rate Behavior
- 3 Markets and International Interest Rate Parity
- 4 Corporate Risk Management in the Multinational Firm
- 5 Central Banks and Economic Policy after the Crisis: What Have We Learned?
- 6 International Financial Integration: Benefits, Costs, and Policy Challenges
- 7 Links between International Financial Markets and Volatility
- 8 Challenges in Financial Regulation
- 9 International Equity Markets: Risk and Return
- 10 International Corporate Debt Markets
- 11 Financing International Trade
- 12 Cross-Listing Behavior
- 13 International Regulatory Regimes
- 14 Asset Pricing in an International Setting
- 15 The Home Bias Puzzle in Equity Portfolios
- 16 Investing in Emerging and Developing Markets
- 17 International Investment Patterns
- 18 Integrated versus Segmented Capital Markets: Implications for Financial Decision-Making
- 19 Multinational Capital Budgeting: Valuing Cross-Border Investments
- 20 Multinational Restructuring
- 21 Corporate Management of Foreign Currency Risk: Conceptual Framework, Policies, and Strategies
- 22 Multinational Cost of Capital and Capital Structure
- 23 Dividend Policy across Countries
- 24 International Governance and Convergence
- 25 Business Bankruptcies across Countries and the Law
- 26 Alternative Financing Methods
- 27 Differences in Ownership Structures across Countries
- 28 Understanding Financial Market Failures
- Discussion Questions and Answers
- Index
Multinational Cost of Capital and Capital Structure
Multinational Cost of Capital and Capital Structure
- Chapter:
- (p.466) 22 Multinational Cost of Capital and Capital Structure
- Source:
- International Finance
- Author(s):
FRANCK BANCEL
USHA R. MITTOO
ZHOU ZHANG
- Publisher:
- Oxford University Press
Financial theory predicts that multinational corporations (MNCs) should have a lower cost of capital and a higher leverage level compared to domestic corporations (DCs) because of their enhanced access to global capital markets and risk diversification across countries. Empirical evidence, however, shows that the answer depends on the MNCs' home and host country factors, such as capital market development, institutional environment, and political stability. While the prediction holds for MNCs based in emerging markets, the opposite is observed for U.S. MNCs that expand into less stable economies. The increased globalization of the product and capital markets in the 1990s has also narrowed the gap in cost of capital between MNCs and DCs and this trend is likely to continue in the future.
Keywords: multinational corporations, cost of capital, capital structure, international capital markets, business risk
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- Title Pages
- Acknowledgments
- Contributors
- 1 International Finance: An Overview
- 2 A Primer on Exchange Rate Behavior
- 3 Markets and International Interest Rate Parity
- 4 Corporate Risk Management in the Multinational Firm
- 5 Central Banks and Economic Policy after the Crisis: What Have We Learned?
- 6 International Financial Integration: Benefits, Costs, and Policy Challenges
- 7 Links between International Financial Markets and Volatility
- 8 Challenges in Financial Regulation
- 9 International Equity Markets: Risk and Return
- 10 International Corporate Debt Markets
- 11 Financing International Trade
- 12 Cross-Listing Behavior
- 13 International Regulatory Regimes
- 14 Asset Pricing in an International Setting
- 15 The Home Bias Puzzle in Equity Portfolios
- 16 Investing in Emerging and Developing Markets
- 17 International Investment Patterns
- 18 Integrated versus Segmented Capital Markets: Implications for Financial Decision-Making
- 19 Multinational Capital Budgeting: Valuing Cross-Border Investments
- 20 Multinational Restructuring
- 21 Corporate Management of Foreign Currency Risk: Conceptual Framework, Policies, and Strategies
- 22 Multinational Cost of Capital and Capital Structure
- 23 Dividend Policy across Countries
- 24 International Governance and Convergence
- 25 Business Bankruptcies across Countries and the Law
- 26 Alternative Financing Methods
- 27 Differences in Ownership Structures across Countries
- 28 Understanding Financial Market Failures
- Discussion Questions and Answers
- Index
