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Influence of Macroeconomic Factors in the Capital Structure of Foreign Subsidiarie

Author

Listed:
  • João Paulo Martins Linhares
  • Hsia Hua Sheng
  • Daniela Verzola Vaz
  • Nilton Deodoro Moreira Cardoso Junior

Abstract

This article examines the influence of macroeconomic factors in the capital structure of subsidiaries of foreign multinational companies (SFM) in Brazil by comparing them with local Brazilian companies (LBC) during the period from 1998–2008. Panel data econometrics was used to analyze the data and test the hypotheses. During this period, exchange rate variation was positively associated with local leverage, which supported the hypothesis of income hedging in the context of foreign currency exposure of the head office. We also found less local leverage for foreign multinational companies when the macroeconomics scenario became more stable. Finally, contrary to the initial hypothesis, differences in financing rates between Brazil and the SFMs’ head office country were positively related to local leverage.

Suggested Citation

  • João Paulo Martins Linhares & Hsia Hua Sheng & Daniela Verzola Vaz & Nilton Deodoro Moreira Cardoso Junior, 2017. "Influence of Macroeconomic Factors in the Capital Structure of Foreign Subsidiarie," Outlines of global transformations: politics, economics, law, Center for Crisis Society Studies, vol. 10(4).
    • Handle: RePEc:ccs:journl:y:2017:id:43
    DOI: 10.23932/2542-0240-2017-10-4-101-113
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