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Affiliates’ Bank Debt Policy: Does Parent Firm Nationality Matter?
Author(s) -
Locorotondo Rosy,
Dewaelheyns Nico,
Hulle Cynthia
Publication year - 2015
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/jbfa.12116
Subject(s) - ceteris paribus , debt , nationality , business , enforcement , financial system , monetary economics , external debt , economics , finance , political science , immigration , law , microeconomics
Abstract This paper examines whether and how bank debt is affected by foreign group affiliation. Ceteris paribus , affiliates of foreign business groups only use about half as much bank debt compared to affiliates of domestic groups. Further, the results indicate that geographical and cultural distance between parent and affiliate countries raise barriers when accessing bank financing. The bank debt usage decreases even further if affiliates and parent firms depend on different legal systems or the degree of legal enforcement in the parent firm's country is low.