Internationalization And Capital Structure

Since China joined WTO in 2001,Chinese firms have gradually participated in the international market.According to WIND database,the number of Chinses firms,which listed in the Shanghai or Shenzhen and had oversea revenue,has increased rapidly from 7 in 2000 to 1715 in 2015.The increasing Chinese firm internationalization plays a key role in the worldwide product and factor markets.Internationalizing firms' specific firm characteristics,industry factors and international operating factors including foreign exchange risk etc.all affect firms' capital structures.Foreign researches on the relation between internationalization and capital structure are abundant,while domestic scholars rarely get involved in this aspect.Academically,there is a highly demand for domestic researches on this aspect to keep up with increasing Chinese firm internationalization and provide guidance for practice.This paper aims to explore the impact of firm internationalization on capital structure and its mechanism to enrich the researches on Chinese firm internationalization and expand domestic study of determinants on capital structure.This paper bases on the data of Chinese listed firms from 2004 to 2015 to analyze the relation between internationalization and capital structure.This paper also takes the financial crisis into account and investigates its possible impact on the relation.The empirical evidence indicates that firm internationalization significantly affects firms'capital structure decision and that the nexus between them is significantly changed by financial crisis.The main conclusions of this paper are as follows:(1)Chinese listed firms' debt ratios decrease as the level of firm internationalization increases.This is mainly because as firms' operation becomes increasingly geographically dispersed,difficulties in gathering and processing information make monitoring both difficult and costly for providers of debt funding.Consequently,financier requires higher interest payments,which leads to a lower debt ratio for internationalizing firms.(2)Financial crisis can weaken their relation.