Form of ownership and financial constraints : panel data evidence from leverage and investment equations

The authors analyze whether form of ownership affects the substitutability of internal and external sources of finance. In particular, they test whether financial constraints are more severe for independent firms, and whether members of large national business groups suffer different constraints than subsidiaries of foreign multinational corporations. The results for leverage and investment equations estimated for a panel of Italian companies suggest that: a) independent firms face more severe financial constraints than other firms do; and b) members of national groups and subsidiaries of multinational corporations are not oversensitive to cash flow in their investment decisions. But leverage equations suggest interesting differences between the two groups. In particular, agency costs arising from the conflict between managers and shareholders are more important for subsidiaries of multinational corporations.Economic Theory&Research,Payment Systems&Infrastructure,Microfinance,International Terrorism&Counterterrorism,Banks&Banking Reform,Economic Theory&Research,International Terrorism&Counterterrorism,Banks&Banking Reform,Small Scale Enterprise,Microfinance

The offshoring of financial services : a reassessment

Operating in increasingly competitive market environment, financial services companies are engaged in international re-engineering of business processes mirroring developments in manufacturing over the past four decades. Drawing upon interviews conducted with senior managers and partners from two leading international banks, a multinational 'consumables' provider and a leading finance consultancy, as well as extensive published surveys, we examine the distinctive 'anatomy' of offshoring in financial services, and industry which also manifests a high degree of geographical concentration for 'higher order' functions. We conclude that the reality of process re-engineering in the sector has frequently failed to meet business objectives, and has run the risk of creating 'backlash' from employees in both home and host environments

Innovation and Business Growth through Corporate Venturing in Latin America: Analysis of Strategic Fit

Corporate venturing as a strategy for international business development has become significant in view of the process of globalization resulting into the free trade and business development opportunities for multinational companies. This study is based on empirical investigation through semi-structured interviews administered to the managers of multinational companies operating in Mexico. The success of the corporate ventures in Mexico has been evaluated from the perspectives of economic and relational attributes. The results of the study showed that the degree of fit between a corporate parent and venture affects the success of the venture. The success is associated with high levels of commitment, competitive skills and dynamics in functional management of the venture. In the study the variables of economic and relational dimensions of external and internal fit have shown greater association with venture success. It has also been found that ventures opt for greater autonomy and less economic dependency with their parent ventures for leading success and this finding make an intuitive sense.Internal and external fit, finance and investment, business performance, economic and relational factors, venture autonomy

Corporate Cash Holdings, National Culture, and Multinationality

We examine the relations between national cultures, the multinationality of the firm and its holdings of cash. We develop several hypotheses from well known corporate finance theories and theories of the multinational firm, positing that cultural factors as well as the degree of multinationality of firms influence their decisions to hold cash. In particular, firms in countries with high uncertainty avoidance, as a national culture, hold more cash as a way to hedge against undesired states of nature. Furthermore, as a reflection of their longer business cycles, multinational firms typically hold more cash. At the same time, however, the multinationality of the firm moderates the effects of culture on the firm’s decision to hold liquid assets. Based on a large panel of firms in forty countries, we present evidence consistent with these hypotheses. While firms in countries with high levels of uncertainty avoidance tend to hold more cash, the degree of multinationality of the firm is positively correlated with holdings of cash. On the other hand, the effect of national culture on firm’s cash holdings is lower for multinationals.Cash, Culture, Finance

Export intensity of foreign subsidiaries of multinational enterprises: the role of trade finance availability

We examine the relationship between the role of trade finance availability and the export intensity of foreign subsidiaries of multinational enterprises (MNEs). In developing our hypotheses, we draw upon insights derived from “new” internalisation theory (international business literature) and international trade finance (international economics literature). We empirically test these hypotheses using survey data compiled from subsidiary managers in six ASEAN countries, supplemented with host-country level data. We conceptualise, empirically test, and establish that the subsidiary-level capability in combining and utilising internal and external debts is an important subsidiary-specific advantage to support export intensity. We find that subsidiaries employ intra-firm loans from MNE internal capital markets and, to some extent, bank loans from external financial institutions to boost their export intensity. Subsidiaries may have concerns about foreign exchange risks, but the use of appropriate foreign exchange risk management is positively associated with export intensity. We discuss the implications of our findings for theory and practice

Corporate Cash Holdings, National Culture, and Multinationality

We examine the relations between national cultures, the multinationality of the firm and its holdings of cash. We develop several hypotheses from well known corporate finance theories and theories of the multinational firm, positing that cultural factors as well as the degree of multinationality of firms influence their decisions to hold cash. In particular, firms in countries with high uncertainty avoidance, as a national culture, hold more cash as a way to hedge against undesired states of nature. Furthermore, as a reflection of their longer business cycles, multinational firms typically hold more cash. At the same time, however, the multinationality of the firm moderates the effects of culture on the firm’s decision to hold liquid assets. Based on a large panel of firms in forty countries, we present evidence consistent with these hypotheses. While firms in countries with high levels of uncertainty avoidance tend to hold more cash, the degree of multinationality of the firm is positively correlated with holdings of cash. On the other hand, the effect of national culture on firm’s cash holdings is lower for multinationals.http://deepblue.lib.umich.edu/bitstream/2027.42/57256/1/wp876 .pd

Religion and Interfaith Dialogue: The Forgotten Pedagogical DEI Initiative in Business Education and Strategic Planning

Diversity, equity, and inclusion (DEI) initiatives are considered “mission critical” objectives within higher education strategic planning processes and by accrediting bodies, particularly at private liberal arts-based institutions. A research gap currently exists with respect to how organized faith, religion, and interfaith dialogue play a pedagogical role in business, particularly when preparing undergraduate students for technical business careers in accounting, finance, and decision sciences. Viewed as the “forgotten DEI” initiative, interfaith dialogue is critical to success at multinational corporations and at the center of employee resource group (ERG) creation. The infusion of interfaith classroom examples, articles, and pedagogy can serve a dual purpose, both preparing undergraduates for careers in technical business disciplines and exposing them to cross-cultural dialogue necessary within multinational companies. This paper describes how religion and interfaith dialogue can be incorporated within the pedagogical design of technical business disciplines to help support DEI initiatives and students preparing for careers in a global world

How Low Business Tax Rates Attract Multinational Headquarters: Municipality-Level Evidence from Germany

Most existing empirical evidence on the impact of profit taxation on multinational firm activity is based on cross-country data. One major drawback of such data is that countries differ not only with regard to taxes but along other dimensions which might be hard to capture by means of observable characteristics. We compile a database of more than 11,000 municipalities in Germany to analyze the sensitivity of the location decisions of foreign MNEs with respect to business tax rates which are levied directly by the municipalities. Using count data models suited for cross-sectional and panel data, we find that higher business tax rates have a negative effect on the number of foreign MNE headquarters, after controlling for other determinants of firm location decisions. On average, a one-percent reduction of the municipal business tax rate (equivalent to a decline by about 0.14 percentage points) leads to an increase in the number of headquarters of foreign MNEs by about 0.05. Hence, the average municipality needs to reduce its business tax rate by 20% to attract one foreign MNE.multinational firms, profit taxation, regional public finance, count data

Creditor Rights and Debt Allocation within Multinationals

We analyze the optimal debt structure of multinational corporations choosing between centralized or decentralized borrowing. We identify how this choice is affected by creditor rights and bankruptcy costs, taking into account managerial incentives and coinsurance considerations. We find that partially centralized borrowing structures are optimal with either weak or strong creditor rights. For intermediate levels of creditor rights fully decentralized (centralized) borrowing structures are optimal if managers have strong (weak) empire building dencies. Decentralized borrowing is more attractive for companies focussing on short-term profitability. Credits are rather taken in countries with better creditor rights and more efficient insolvency systems

The entry of multinational companies to the base of the pyramid: A network perspective

Multinational corporations (MNCs) have traditionally ignored low-income markets, usually referred to as the base of the pyramid (BOP). Despite the dominant poverty in this market, a growing number of MNCs are attempting to learn about successful strategies for entering this market segment. Some of the studies suggest that establishing relationships with non-governmental organizations (NGOs) is crucial at the BOP. In this paper, we focus on relationship between MNCs and NGOs and try to explain how they facilitate MNCs? entry into this market. A network perspective has been adopted in this research and the relationship between MNCs and NGOs has been analysed in relation to this theoretical framework. Interviews with four MNCs and their NGO partners in India suggest that corporations can enter the BOP market by building trust in their relationships with NGOs and consequently the BOP, demonstrating their commitment and strengthening their legitimate position among NGOs and BOP communities