Open AccessDo Multinational And Local Corporations Differ In Their Leverage Policies? Evidence From The MENA Region
Author(s) -
Omar Farooq
Publication year - 2015
Publication title -
journal of applied business research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.149
H-Index - 22
eISSN - 2157-8834
pISSN - 0892-7626
DOI - 10.19030/jabr.v32i1.9482
Subject(s) - multinational corporation , leverage (statistics) , debt , opportunism , business , information asymmetry , monetary economics , capital structure , finance , economics , market economy , machine learning , computer science
This paper examines the leverage policies of multinational corporations (MNCs) in comparison to those of local corporations in the MENA region during the period between 2006 and 2012. Our results show that MNCs have lower leverage levels than local firms. We argue that MNCs have higher information asymmetries than other firms. As a result, managerial opportunism may be higher in these firms, thereby minimizing their ability to raise debt. In case of local firms, we show that their debt ratios are not different from other firms. Furthermore, we also show that our results do not hold for those multinational firms that have lower agency problems. We show that, for a given level of information asymmetries (operational and informational complexity), debt ratios of multinational firms are more than other firms. Our results show no impact of the extent of information asymmetries on debt ratios of local firms.