How International Operations Affect the Capital Structure of Multinationals: A Review of the Literature

The rising globalization of the past decades has been pushing firms to expand their activities internationally in order to remain competitive. Serving foreign markets offers various opportunities, but also exposes firms to additional risks affecting their capital structure. Theoretically the literature identifies five international capital structure determinants: international market diversification, international agency costs, political risk, exchange rate risk and tax policy. However, due to the complexity of international operations and the difficulty of finding accurate proxies, empirical studies struggle to disentangle the individual impact of each international determinant, leaving room for further research.