Financial shock and the United States multinational and domestic corporations leverage

Figures & data

Table 1. Industry Distribution of Firms in the Study Sample

The table presents the number of firms for MNC10, MNC25, and DC across Fama-French’s 12 industries over the years 2002–2019. MNC10 (MNC25) includes firm–years in which the FTX is no less than 10% (25%); DC includes firm–years with zero foreign tax.
Industry code	Industry name	MNC10	MNC25	DC
1	Consumer non-durables	859	561	367
2	Consumer durables	546	454	81
3	Manufacturing	2189	1691	437
4	Oil, gas, and coal extraction and products	552	448	812
5	Chemicals and allied products	699	571	86
6	Business equipment	3115	2445	344
7	Telephone and television transmission	308	202	634
8	Utilities	0	0	0
9	Wholesale, retail, and some services	783	459	1687
10	Healthcare, medical equipment, and drugs	974	728	603
11	Finance	0	0	0
12	Other	1348	1005	1703
Total		11373	8564	6754

Table 2. Summary statistics for firm characteristic variables

The table presents summary statistics for the main variables in three samples— MNC10, MNC25, and DC—over 2002–14. MNC10 (MNC25) includes firm–years in which the FTX is at least 10% (25%); DC includes firm–years with zero FTX. All variable definitions are provided in Appendix A 1.
	MNC10						MNC25						DC
	N	Mean	Median	Std.de	Min	Max	N	Mean	Median	Std.de	Min	Max	N	Mean	Median	Std.de	Min	Max
Mleverage	11373	.207	.157	.203	0	.947	8564	.2165	.167	.206	0	.947	6754	.300	.244	.263	0	.947
Bleverage	11373	.227	.204	.197	0	2.381	8564	.233	.211	.196	0	2.12	6757	.306	.273	.270	0	4.37
Profitability	11369	.129	.125	.079	−.988	.437	8561	.124	.121	.079	−.988	.437	6743	.128	.126	.110	−1.69	.437
MB	11373	1.84	1.566	.956	.522	7.478	8564	1.81	1.54	.930	.522	7.41	6754	1.66	1.40	.900	.522	7.44
Size	11373	7.761	7.594	1.439	5.521	10.560	8564	7.783	7.61	1.45	5.52	10.56	6754	7.04	6.81	1.15	5.52	10.56
TANG	11357	.462	.370	.337	0	2.402	8551	.469	.377	.339	0	2.40	6706	.653	.617	.454	0	2.40
EarnVol	11070	.035	.023	.052	.003	1.840	8315	.036	.023	.055	0	1.84	6389	.047	.026	.130	.003	5.89
RD	7957	.049	.029	.054	0	.652	6076	.051	.031	.055	0	.652	2795	.019	0	.050	0	.579
NDTS	11369	.040	.035	.026	0	.320	8561	.041	.035	.026	0	.320	6743	.050	.042	.039	0	.320
TA (US$M)	11373	10874.	1987.8	36597	250.0	797769	8564	11404.6	2019.2	38656	250	797769	6754	2903	914.2	7144.7	250.07	118534

Table 3. Regression results comparing the leverage level between MNCs and DCs during the GFC

Regression results compare the leverage ratio of US MNCs and DCs before, during, and after the GFC, including the years 2006–10. The table presents regression results for the samples of MNCs (i.e., MNC10 and MNC25) and DCs over the period 2002–14. The dependent variables in the regressions are Mleverage and Bleverage. The interaction variable MNC*Crisis2008 is used to compare the leverage ratio between MNCs and DCs during the crisis. The other interaction variables (MNC*2006, MNC*2007, MNC*2008, MNC*2009, and MNC*2010) compare the leverage ratios between MNCs and DCs in each relevant year. MNC10 (MNC25) is an indicator variable equal to 1 when a firm’s FTX in a given year is at least 10% (25%) of its total tax and 0 otherwise. The control variables are profitability, MB, size, TANG, EarnVol, RD, and NDTS. The definitions for the mentioned control variables are provided in Appendix Table 1. The numbers in parentheses are robust standard errors; *.**. and *** represent two-tailed significance at the 10%, 5%, and 1% levels, respectively.
Variables	(1)(FE)MNC10 sampleMleverage	(2)(FE)MNC10 sampleBleverage	(3)(FE)MNC25 sampleMleverage	(4)(FE)MNC25 sampleBleverage
MNC*2006	−0.0094**	−0.0093**	−0.0115**	−0.131**
	(0.0036)	(0.0044)	(0.00458)	(0.004)
MNC*2007	−0.00173	−0.004	−0.006	−0.007
	(0.00433)	(0.0045)	(0.005)	(0.005)
MNC*Crisis2008	0.0609***	0.0124**	0.027***	0.011**
	(0.00641)	(0.00521)	(0.008)	(0.005)
MNC*2009	−0.00081	−0.0124**	0.003	−0.0120**
	(0.00460)	(0.00468)	(0.005)	(0.0054)
MNC*2010	−0.0139***	−0.0154***	−0.017***	−0.0161***
	(0.00387)	(0.00351)	(0.004)	(0.004)
MNC	−0.0058	0.0089	−0.005	−0.006
	(0.0157)	(0.0176)	(0.021)	(0.018)
Profitability	−0.504***	−0.326***	−0.496***	−0.293***
	(0.053)	(0.0577)	(0.059)	(0.065)
MB	−0.0353***	0.0021	−0.041***	−0.001
	(0.0039)	(0.0040)	(0.004)	(0.004)
Size	0.0372***	0.0334***	0.038***	0.033***
	(0.006)	(0.0067)	(0.006)	(0.0075)
TANG	0.065**	−0.0083	0.080**	0.016
	(0.0271)	(0.0067)	(0.03)	(0.027)
EarnVol	0.035	−0.036	0.029	−0.077
	(0.0489)	(0.0364)	(0.053)	(0.063)
RD	−0.0931	−0.212**	−0.099	−0.202*
	(0.0789)	(0.10)	(0.09)	(0.112)
NDTS	0.769***	0.741***	0.680***	0.605***
	(0.186)	(0.207)	(0.190)	(0.203)
Constant	−0.0114	−0.028	−0.004	−0.002
	(0.0513)	(0.0561)	(0.059)	(0.061)
Observations	10456	10456	8603	8603
Number of firms	1930	1930	1761	1761
R-squared	0.20	0.05	0.205	0.05

Table 4. Regression results comparing the leverage level between MNCs and DCs during the GFC

Leverage regression comparing the leverage ratio of US MNCs and DCs before, during, and after the GFC, for the period 2006–10 after constructing a sample based on a US$1 billion total assets cut-off.
Variables	(1)MNC10 sampleMleverage	(2)MNC10 sampleBleverage	(3)MNC25 sampleMleverage	(4)MNC25 sampleBleverage
MNC*2006	−0.0115**	−0.0119**	−0.0107**	−0.0123**
	(0.00428)	(0.00518)	(0.00515)	(0.00502)
MNC*2007	−0.00105	−0.00802*	−0.00132	−0.00672
	(0.00521)	(0.00462)	(0.00614)	(0.00526)
MNC*Crisis2008	0.0595***	0.0115**	0.0641***	0.0140**
	(0.00751)	(0.00568)	(0.00839)	(0.00594)
MNC*2009	−0.00163	−0.0164**	0.000920	−0.0135**
	(0.00504)	(0.00500)	(0.00606)	(0.00563)
MNC*2010	−0.0139***	−0.0120**	−0.0169***	−0.0134**
	(0.00387)	(0.00391)	(0.00456)	(0.00449)
MNC	−0.0177	0.0132	−0.0241	−0.0242
	(0.0290)	(0.0412)	(0.0429)	(0.0502)
Profitability	−0.586***	−0.408***	−0.572***	−0.371***
	(0.103)	(0.0467)	(0.117)	(0.0515)
MB	−0.0427***	7.97e–06	−0.0521***	−0.00331
	(0.00662)	(0.00472)	(0.00804)	(0.00381)
Size	0.0290***	0.0312***	0.0288**	0.0285**
	(0.00842)	(0.00851)	(0.00973)	(0.00982)
TANG	0.0760*	−0.0117	0.0950**	−0.00740
	(0.0393)	(0.0302)	(0.0475)	(0.0327)
EarnVol	0.180	−0.134	0.215	−0.168
	(0.148)	(0.104)	(0.174)	(0.118)
RD	−0.00685	−0.176	0.0258	−0.111
	(0.106)	(0.133)	(0.128)	(0.148)
NDTS	0.601*	0.588*	0.467	0.464
	(0.318)	(0.317)	(0.353)	(0.293)
Constant	0.0842	0.0210	0.107	0.0827
	(0.0824)	(0.0867)	(0.0960)	(0.0926)
Observations	6,240	6,240	5,066	5,066
R-squared	0.221	0.063	0.227	0.058

Table 5. Regression results comparing the leverage level between MNCs and DCs using an alternative classification for MNCs (foreign Pre-tax Income)

Leverage regression comparing the leverage ratio of US MNCs and DCs before, during and after the GFC, which includes the period 2006–10, after applying foreign pre-tax income to classify MNCs.
Variables	(1)US$1B cut-offMleverage	(2)US$1B cut-offBleverage	(3)US$250M cut-offMleverage	(4)US$250M cut-offBleverage
MNC*2006	−0.0146***	−0.0145***	−0.0119***	−0.0119**
	(0.00382)	(0.00423)	(0.00333)	(0.00388)
MNC*2007	−0.00422	−0.00636	0.000478	−0.00350
	(0.00457)	(0.00469)	(0.00393)	(0.00434)
MNC*Crisis2008	0.0560***	0.0165**	0.0620***	0.0202***
	(0.00657)	(0.00556)	(0.00574)	(0.00511)
MNC*2009	−0.00384	−0.0116**	−0.00112	−0.00985**
	(0.00471)	(0.00507)	(0.00414)	(0.00434)
MNC*2010	−0.0137***	−0.0120**	−0.00977**	−0.0120**
	(0.00380)	(0.00394)	(0.00338)	(0.00383)
MNC	−0.0174	−0.00426	−0.0154*	−0.00847
	(0.0131)	(0.0120)	(0.00792)	(0.00848)
Profitability	−0.576***	−0.350***	−0.501***	−0.332***
	(0.0791)	(0.0510)	(0.0434)	(0.0479)
MB	−0.0410***	−0.00220	−0.0337***	0.00173
	(0.00548)	(0.00495)	(0.00340)	(0.00403)
Size	0.0365***	0.0412***	0.0399***	0.0406***
	(0.00728)	(0.00787)	(0.00526)	(0.00607)
TANG	0.101**	0.0331	0.0709**	0.0298
	(0.0344)	(0.0296)	(0.0241)	(0.0235)
EarnVol	0.0668	−0.141*	0.00587	−0.0438
	(0.111)	(0.0796)	(0.0439)	(0.0633)
RD	−0.0866	−0.244**	−0.158**	−0.225**
	(0.100)	(0.124)	(0.0737)	(0.0940)
NDTS	0.403*	0.145	0.629***	0.527**
	(0.243)	(0.226)	(0.152)	(0.204)
Constant	0.0171	−0.0545	−0.0232	−0.0706
	(0.0681)	(0.0766)	(0.0441)	(0.0515)
Observations	7,548	7,548	12,678	12,678
R-squared	0.217	0.062	0.202	0.058
Number of firms	1,175	1,175	2,062	2,062

Table 6. Regression results comparing the leverage levels between MNCs and DCs Using an alternative classification for MNCs (Foreign Pre-tax Income)

Leverage regression comparing the leverage ratio of US MNCs and DCs before, during and after the GFC, which covers the period 2006–10, after applying foreign sales to classify MNCs. The table presents regression results for MNCs two samples (i.e. FSR20 and FSR50) and DCs over the period 2002–2019.
Variables	(1)(FE)FSR20% sampleMleverage	(2)(FE)FSR20% sampleBleverage	(3)(FE)FSR50% sampleMleverage	(4)(FE)FSR50% sampleBleverage
MNC*2006	−0.015***	−0.013**	−0.005	−0.006
	(0.00)	(0.01)	(0.01)	(0.01)
MNC*2007	−0.006	−0.007	−0.003	−0.006
	(0.01)	(0.01)	(0.01)	(0.01)
MNC*Crisis2008	0.069***	0.013**	0.082***	0.023***
	(0.01)	(0.01)	(0.01)	(0.01)
MNC*2009	−0.001	−0.019***	0.006	−0.011
	(0.00)	(0.00)	(0.01)	(0.01)
MNC*2010	−0.019***	−0.023***	−0.019***	−0.021***
	(0.00)	(0.00)	(0.01)	(0.01)
MNC	−0.017	−0.025	−0.061**	−0.074**
	(0.02)	(0.02)	(0.03)	(0.03)
Profitability	−0.337***	−0.262***	−0.265***	−0.235***
	(0.04)	(0.05)	(0.05)	(0.05)
MB	−0.027***	−0.002	−0.030***	−0.003
	(0.00)	(0.00)	(0.00)	(0.00)
Size	0.031***	0.029***	0.044***	0.038***
	(0.01)	(0.01)	(0.01)	(0.01)
TANG	0.031	0.008	0.011	0.009
	(0.03)	(0.03)	(0.03)	(0.04)
EarnVol	0.101*	0.069	0.132*	0.071
	(0.06)	(0.07)	(0.08)	(0.10)
RD	−0.195**	−0.299*	−0.140	−0.298
	(0.09)	(0.16)	(0.09)	(0.21)
NDTS	0.461**	0.114	0.563**	0.048
	(0.20)	(0.33)	(0.24)	(0.36)
Constant	0.035	0.063	−0.044	0.022
	(0.05)	(0.07)	(0.07)	(0.08)
Observations	7,412	7,412	4,522	4,522
Number of firms	1,046	1,046	759	759
R-squared	0.18	0.05	0.19	0.06

Table

Multinational activities
FTX	foreign tax/total tax
MNC10	a dummy variable that equals 1 if the FTX is at least 10% and 0 otherwise
MNC25	a dummy variable that equals 1 if the FTX is at least 25% and 0 otherwise
FSR20	MNCs that report at least 20% foreign sales ratio (FSR)
FSR50	MNCs that report at least 50% FSR
Capital structure variables
Mleverage	(long -term book debt + short-term debt)/ (long-term debt short-term book debt + stock price * number of outstanding shares)
Bleverage	(long-term book debt + short-term debt)/total assets
Financial crisis variables
Crisis2008	a dummy variable that equals 1 if the year is 2008 and 0 if not
MNC*Crisis2008	Crisis 2008 dummy multiplied by the MNC dummy
Pre-crisis variables
Pre-Crisis2006	a dummy variable that equals 1 if the year is 2006 and 0 if not
Pre-Crisis2007	a dummy variable that equals 1 if the year is 2007 and 0 if not
MNC*Pre-Crisis2006	pre-Crisis2006 dummy multiplied by the MNC dummy
MNC*Pre-Crisis2007	pre-Crisis2007 dummy multiplied by the MNC dummy
Post-crisis variables
Post-Crisis2009	a dummy variable that equals 1 if the year is 2009 and 0 if not
Post-Crisis2010	a dummy variable that equals 1 if the year is 2010 and 0 if not
MNC*Post-Crisis2009	post-Crisis2009 dummy multiplied by the MNC dummy
MNC*Post-Crisis2010	post-Crisis2010 dummy multiplied by the MNC dummy
Firm characteristic variables
Profitability	ratio of EBITDA to total assets
MB	(total assets—book equity + market value of equity)/total assets
Size	natural logarithm of total assets
TANG	ratio of property, plant, and equipment to total book assets
RD	R&D investment/total assets
EarnVol	standard deviation of EBIT to total assets over the most recent 3 years
NDTS	ratio of depreciation and amortization to total assets