Multinational Corporate Financing and Foreign Exchange Parity Relations
نویسندگان
چکیده
Given the increasing importance of financing in foreign currency denominated debt, researchers have shown the conditions under which raising capital denominated in a foreign currency becomes feasible. We extend this literature in the context of a multinational corporation (MNC) by modeling the rivalry between equity and debt under a modified general equilibrium framework. We derive (i) international exchange rate parity relations as extensions of the risk free debt finance models under risk aversion and market imperfections such as taxes, and (ii) optimal capital structure of an MNC using the principle of Paretooptimality. JEL Classifications: G32; F23; F30
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