Foreing Activity Effects And Capital Structure: Brasilian Evidence

This paper analyzes whether Brazilian companies with foreign activities (MNC) have different capital structure from those with mainly local activities (DC). If so, is the upstream-downstream hypothesis prediction valid - which states that internationalized companies use more debt than those with loc...

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Bibliographic Details
Published in:	Academia (Consejo Latinoamericano de Escuelas de Administración) 2010-09 (45), p.59
Main Authors:	Saito, Richard, Hiramoto, Eduardo
Format:	Article
Language:	por
Subjects:	Capital markets Capital structure Debt (Financial) Environmental Influences Evidence Globalization Hypotheses Literature reviews Multinational corporations
Online Access:	Get full text
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Summary:	This paper analyzes whether Brazilian companies with foreign activities (MNC) have different capital structure from those with mainly local activities (DC). If so, is the upstream-downstream hypothesis prediction valid - which states that internationalized companies use more debt than those with local activities? Our sample consists of 131 companies within the period from 2004-2008. We found that Brazilian MNCs use more debt due to international activities, with 9.6% more leverage of which 5.8% comes from long-term sources. Our results also show that international activity is positively related to foreign debt usage, and on average MNCs carry 12.7% more foreign debt in their capital structure. Although the access to international capital markets is frequently suggested as a motivation for companies to internationalize, this is the first study to test empirically whether international activity and debt financing are related.
ISSN:	1012-8255 2056-5127