Cover Image

Debt heterogeneity, agency costs and business risk of multinational corporations

Internationalization enables multinational corporations (MNCs) to diversify their source and type of debt as well as earnings, although doing so incurs agency costs of debt and business risk.To mitigate these costs, existing studies find that MNCs typically have lower levels of long-term debt than d...

Full description

Saved in:
Bibliographic Details
Main Authors: Khaw, Lee-Hwei, Batten, Jonathan A., Young, Martin R.
Format: Conference or Workshop Item
Language:English
Published: 2014
Subjects:
HG Finance
Online Access:http://repo.uum.edu.my/11579/1/D.pdf
http://repo.uum.edu.my/11579/
http://umconference.um.edu.my/
Tags: Add Tag
No Tags, Be the first to tag this record!
id my.uum.repo.11579
record_format eprints
spelling my.uum.repo.115792016-04-18T01:37:12Z http://repo.uum.edu.my/11579/ Debt heterogeneity, agency costs and business risk of multinational corporations Khaw, Lee-Hwei Batten, Jonathan A. Young, Martin R. HG Finance Internationalization enables multinational corporations (MNCs) to diversify their source and type of debt as well as earnings, although doing so incurs agency costs of debt and business risk.To mitigate these costs, existing studies find that MNCs typically have lower levels of long-term debt than domestic corporations (DCs). One key limitation of these studies is their failure to recognize the heterogeneity of debt, specifically the equity options embedded in the debt issued by MNCs. We show that in the presence of agency costs of debt and business risk, MNCs are able to mitigate the negative effects on long-term debt by utilizing convertible debt in their debt structure, as compared to DCs. Therefore, MNCs are able to sustain higher levels of long-term debt to make the most from international diversification. Relatively, the significance of business risk is found to out weigh the significance of agency costs as MNCs further increase their degree of internationalization.Evidence also shows that the issuers of convertible debt are not dominated by smaller and riskier growth firms, but is linked to internationalization. 2014-06-04 Conference or Workshop Item NonPeerReviewed application/pdf en http://repo.uum.edu.my/11579/1/D.pdf Khaw, Lee-Hwei and Batten, Jonathan A. and Young, Martin R. (2014) Debt heterogeneity, agency costs and business risk of multinational corporations. In: 16th Malaysian Finance Association Conference (MFA2014), 4 - 6 June 2014, Sasana Kijang Central Bank of Malaysia, Kuala Lumpur. (Unpublished) http://umconference.um.edu.my/
institution Universiti Utara Malaysia
building UUM Library
collection Institutional Repository
continent Asia
country Malaysia
content_provider Universiti Utara Malaysia
content_source UUM Institutionali Repository
url_provider http://repo.uum.edu.my/
language English
topic HG Finance
spellingShingle HG Finance
Khaw, Lee-Hwei
Batten, Jonathan A.
Young, Martin R.
Debt heterogeneity, agency costs and business risk of multinational corporations
description Internationalization enables multinational corporations (MNCs) to diversify their source and type of debt as well as earnings, although doing so incurs agency costs of debt and business risk.To mitigate these costs, existing studies find that MNCs typically have lower levels of long-term debt than domestic corporations (DCs). One key limitation of these studies is their failure to recognize the heterogeneity of debt, specifically the equity options embedded in the debt issued by MNCs. We show that in the presence of agency costs of debt and business risk, MNCs are able to mitigate the negative effects on long-term debt by utilizing convertible debt in their debt structure, as compared to DCs. Therefore, MNCs are able to sustain higher levels of long-term debt to make the most from international diversification. Relatively, the significance of business risk is found to out weigh the significance of agency costs as MNCs further increase their degree of internationalization.Evidence also shows that the issuers of convertible debt are not dominated by smaller and riskier growth firms, but is linked to internationalization.
format Conference or Workshop Item
author Khaw, Lee-Hwei
Batten, Jonathan A.
Young, Martin R.
author_facet Khaw, Lee-Hwei
Batten, Jonathan A.
Young, Martin R.
author_sort Khaw, Lee-Hwei
title Debt heterogeneity, agency costs and business risk of multinational corporations
title_short Debt heterogeneity, agency costs and business risk of multinational corporations
title_full Debt heterogeneity, agency costs and business risk of multinational corporations
title_fullStr Debt heterogeneity, agency costs and business risk of multinational corporations
title_full_unstemmed Debt heterogeneity, agency costs and business risk of multinational corporations
title_sort debt heterogeneity, agency costs and business risk of multinational corporations
publishDate 2014
url http://repo.uum.edu.my/11579/1/D.pdf
http://repo.uum.edu.my/11579/
http://umconference.um.edu.my/
_version_ 1644280678667255808
score 13.211869

Similar Items