Foreign ownership and the financing constraints of firms operating in a multinational environment

Document Type

Article

Source of Publication

International Review of Financial Analysis

Publication Date

10-1-2022

Abstract

We examine the effects of foreign ownership as well as other firm-specific variables on enterprises' access to credit in 135 underdeveloped nations using micro survey data from the World Bank's Enterprise Surveys. The analysis takes into consideration the role of the multinational environment in the structure and operation of firms. The findings demonstrate that foreign ownership is a strong predictor of a company's ability to acquire financing, but with restrictions. Government ownership and local private owners tend to be significant in line with the control criteria in the research, but foreign ownership and often dominating investors are highly predictive of financing limitations. Whether the firm is a foreign subsidiary and operates separately from its mother company significantly mitigates the foreign ownership effect. Firm-specific traits including size, industry of operation, export status, and accounting auditing represent significant indicators as well. In addition, the caliber of institutions of governance, cultural and social circumstances, and overall measures of financial, political, and human development all seem to be important determinants of access to financing and greatly lessen the impact of ownership structure in various nations.

ISSN

1057-5219

Publisher

Elsevier BV

Volume

83

Disciplines

Business

Keywords

Financing constraints, Investment models, Multinational firms, Ownership structure

Scopus ID

85135687477

Indexed in Scopus

yes

Open Access

no

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