Capital structure choice of foreign subsidiaries: evidence from multinationals in Brazil

• Autor(a) principal: Werlang, Sérgio Ribeiro da Costa
• Data de Publicação: 1998
• Outros Autores: Novaes, Walter
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Institucional do FGV (FGV Repositório Digital)
• Texto Completo: http://hdl.handle.net/10438/756
• topic: Capital structure; Foreign subsidiaries; Political risk; Economia; Empresas multinacionais - Brasil; Empresas multinacionais - Finanças; Economia

Is the capital structure choice of a foreign subsidiary different from the choice of a comparable company controlled by nationals? If so, what are the differences? In this paper we shed some light on these questions by looking at a sample of foreign subsidiaries in Brazil over the period 1985 to 1994. We find that the foreign subsidiaries in our sample are more levered than their Brazilian counterparts. This difference, however, has declined over time. The evidence is consistent with the hypothesis that foreign subsidiaries increase leverage as a hedge against an expropriation of assets in a nationalization process.