The effect of multinationality and management entrenchment on debt conservatism and zero-leverage phenomena, investigating the profile of north american firms adopting extreme conservative leverage conditions

Abstract

This research is aimed to test whether multinationality of firms and management entrenchment are possible driver of companies’ decisions to adopt Zero-Leverage or Almost Zero-Leverage financial decisions. In addition, we analyze the profile of Debt-Conservative firms to understand if the reason why companies decide to have low or nor debt is explained by their financial constraints or instead, by their desire to achieve financial flexibility.We find, across different linear and logistic regressions, that Multinationality and CEOs Ownership positively increase the likelihood of a firm to be Debt-Conservative while controlling for Year and Industry fixed effects. Moreover, our findings suggest that higher the level of International Revenues more significant is the impact of Multinationality on the leverage status of a company for US companies listed in the NYSE and Nasdaq, between 1990 and 2018. Our findings are in line with previous research on the puzzling phenomenon of Zero Leverage and represent the first scientific study on Multinationality and Debt Conservatism for North American companies.

Date of Award	30 Jun 2022
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Panagiotis Dontis Charitos (Supervisor)