Revealing the Financial Strategies of Multinational Giants and Local Enterprises in Pakistan: A Deep Dive into What Drives Their Leverage Choices

Keywords: capital structure, debt, determinants, domestic corporations (DCs), equity, leverage, multinational corporations (MNCs)


The current research comparatively explored the factors affecting the capital structure of domestic corporations (DCs) and multinational corporations (MNCs) in Pakistan for the period 2016-2021. It found that MNCs hold a higher ratio of debt to equity in their mix of capital structures than DCs. Using the fixed effects model, this study established that older firms manage to capitalize their debts. At the same time, the large size of firms and higher bankruptcy costs cause a high debt ratio in the capital structure of both types of corporations. The results also revealed that free cash flows are inversely and significantly associated with the capital structure of DCs. On the contrary, non-debt tax shield, collateral value of assets, and foreign exchange risk are directly and significantly associated with DCs only. This study also found that profitability and agency cost are not significant determinants of capital structure in either type of firms. Significant policy implications stem from the results, particularly in the areas of taxation, international trade, and financial regulation. Moreover, the findings provide insight into the complex interaction of factors influencing the capital structures of DCs and MNCs, which would be helpful for policymakers.


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How to Cite
Yasser, F. (2024). Revealing the Financial Strategies of Multinational Giants and Local Enterprises in Pakistan: A Deep Dive into What Drives Their Leverage Choices. Journal of Finance and Accounting Research, 6(1), 50-76.