Comparative Relationship between Cost of Equity Capital and Leverage in Matched Sets of Multinational Corporations and U.S. Domestic Firms

This empirical research study deals with an interesting, yet little explored, comparative relationship between cost of equity capital and leverage in matched sets of U.S. domestic firms and multinational corporations (MNCs) in a cross-sectional as well as time-series framework. Applying the Kumara Swamy Hypothesis on MNCs shift of incidence of high investment cost incurred via transfer of sophisticated technology and manpower by the operating MNCs in developing countries, the author's research findings reveal that the earnings of MNCs remain higher throughout the range when compared to the U.S. domestic firms, and the greater likelihood of MNCs, with easier access to world capital markets, experiencing a higher comparative earnings – price ratio in the prevent leverage ranges