Multinationality and capital structure dynamics: A corporate governance explanation

Daniel Gyimah*, Nana Abena Kwansa, Anthony K. Kyiu, Anywhere (Siko) Sikochi

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

15 Citations (Scopus)
29 Downloads (Pure)


This paper examines the impact of corporate governance on capital structure dynamics. Using ordinary least squares regressions on 17,496 firm-year observations for 2,294 US multinational companies (MNCs) over the period 1990–2018, we find that MNCs with strong corporate governance use more debt than those with weak governance. Furthermore, strong corporate governance is associated with a faster speed of adjustment to capital structure. This relationship is more pronounced for MNCs than domestic companies, particularly for overlevered firms. We also use the two-part zero-inflated fractional regression model, instrumental variable, and structural equation model estimations to deal with any endogeneity concerns associated with the explanatory variables. Overall, our findings, which withstand a battery of robustness checks, suggest that improvements in corporate governance reduce the costs of monitoring for bondholders, resulting in increased debt financing.

Original languageEnglish
Article number101758
JournalInternational Review of Financial Analysis
Early online date12 Apr 2021
Publication statusPublished - Jul 2021


  • Capital structure
  • Corporate governance
  • Multinationality
  • Speed of adjustment

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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