What do theory and empirical evidence say about capital structure and the cost of capital for MNEs versus their domestic counterparts?

What will be an ideal response?


Answer: In theory, MNEs should be able to support greater amounts of debt due to reduced variability of cash flows brought about by diversification across countries. And, because of this reduced risk borne by MNEs, they should also have a lower cost of capital. However, empirical research finds that domestic firms tend to use greater amounts of short and intermediate debt than do MNEs and that the cost of capital is greater for MNEs due to increased agency costs, political risk, exchange rate risk, and asymmetric information.

Business

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What will be an ideal response?

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The following objective function is nonlinear: Max 5X - 8YZ

Indicate whether the statement is true or false

Business

A bank may contractually shift to the customer the risk of forged checks created electronically or by the use of nonmanual signatures

Indicate whether the statement is true or false

Business

Boycotts that are in violation of the Sherman Act include:

A) a seller's refusal to deal with any particular buyer. B) a manufacturer who refuses to sell to a retailer who persists in selling below the manufacturer's suggested retail price. C) when two or more firms that have market power agree not to deal with a third party, thereby eliminating competition. D) cooperative agreements designed to increase economic efficiency and render markets more competitive.

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