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Multinational Affiliates and Local Financial Markets
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Author/Editor: |
Lehmann, Alexander | Sayek, Selin | Kang, Hyoung Goo |
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June 1, 2004 |
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Electronic Access: |
Free Full Text (PDF file size is 408KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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Summary: We use data on the sources of debt finance of U.S. majority-owned foreign affiliates in 53 countries over the period 1983 to 2001 to examine the role of financial market development, and exposure to host country-specific risk on the financing choices of these affiliates. We find that total balance sheets are about four times as large as the cross-border component of foreign direct investment (FDI). The extent of financial leverage through local debt is positively related to host-country corporate tax rates, exchange rate variability, local currency-denominated sales, and financial development. Factors that further the role of local debt reduce that of parent company debt, and through this substitution overall leverage increases.
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Series: |
Working Paper No. 04/107 |
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Subject(s): |
Foreign investment | United States | Debt refinancing | Domestic debt | Capital markets | International financial system | Data analysis | Tax rates | Exchange rate variability |
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Published: |
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June 1, 2004 |
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Format: |
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Paper |
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Stock No: |
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WPIEA1072004 |
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Pages: |
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25 |
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Price: |
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US$15.00
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