Financial Structure and Bank Relationships of Italian Multinational Firms

Abstract

This paper examines the financial structure and the bank relationships of Italian multinational firms. We show that multinationals are on average more leveraged than non-internationalized firms. Moreover, they have a larger share of financial and bank debt out of total debt, maintain more bank relationships, are less dependent on the main bank for the firm, and benefit from lower interest rates. Lastly, multinationals take greater advantage of intra-group financing than non-internationalized firms. These results are robust to estimation methods that tackle the potential endogeneity of the choice to go international, such as matching and instrumental variables estimation.

Keywords: multinational companies, foreign direct investment, financial structure, bank-firm relationships

JEL Classification: D22, F21, F23, G30, L25