The influence of crises on the financial position of multinationals in emerging markets

ABSTRACT

This investigation is one of the first to analyse the relationships between leverage and bankruptcy costs, interest expenses, tax benefits and firm value, in multinational and domestic companies, during periods of crisis and financial stability. The analysed data are related to the Organisation for Economic Co-operation and Development’s (OECD) most important emerging markets (Brazil, China, India, Indonesia, and South Africa) based on a sample of 15,632 observations from public companies for the period 2004–2019 (including the 2008 crisis). The results suggest that multinational companies incur lower bankruptcy costs than domestic ones. Meanwhile, they also become more valuable. Another difference relates to multinationals’ ability to raise their leverage levels, even in times of crises, in contrast to domestic companies. Multinational companies also exhibit higher financial negotiation power and may obtain lower interest rates than domestic companies. These findings contribute to the understanding of the financial dynamics demonstrated by multinationals and domestic companies in emerging economies during periods of crisis and stability.

KEYWORDS:

• Tax benefits
• financial crises
• emerging markets
• multinational and domestic companies
• structural equation modelling

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

Mackenzie Research and Innovation Fund [Project n. 221009 – Mack – 0008306]