The Impact of Internationalization on Zero Leverage: Evidence from the UK
33 Pages Posted: 14 Mar 2017
Date Written: Jan 31, 2016
Despite the increasing attention on the role of internationalization in firms’ capital structure decisions, and the increasing adoption of zero leverage policies by multinationals, no study attempts to explain the effect of multi-nationality on the zero leverage decision. We explore the relationship between the level of internationalization and zero leverage using a large panel of UK companies, while controlling for various company-related factors. We find a positive relationship between multi-nationality and the propensity of firms to have zero leverage, which rises in magnitude with increases in the level of internationalization. We also provide evidence that the zero leverage decision is affected by industry specificities.
Keywords: Leverage; Zero leverage; Capital structure; Multinational firms; Industry effects
JEL Classification: G30; G32
Suggested Citation: Suggested Citation