Quotation Lindner, Thomas, Müllner, Jakob, Puck, Jonas. 2016. Cost of capital in an international context: Institutional distance, quality, and dynamics. Journal of International Management 22 (3), 234-248.


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Abstract

Cost of debt is a key cognitive anchor for managerial decisions and an important determinant of firm profitability. We extend international management research by analyzing the effects of institutional distance, institutional quality, and their dynamics on the cost of debt in the context of foreign direct investments (FDI). We test our conceptual model on a sample of companies making 3,764 greenfield foreign direct investments from developed into less developed markets. Using hierarchical linear modelling, we show that the financial consequences of internationalizing into countries with weak institutions depend on both the institutional distance between countries, as well as their institutional quality. Furthermore, we find that recent changes in institutional quality form expectations about future development and ultimately influence post investment financing costs.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Journal of International Management
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new STRAT-B, WH-B
Language English
Title Cost of capital in an international context: Institutional distance, quality, and dynamics
Volume 22
Number 3
Year 2016
Page from 234
Page to 248
Reviewed? Y
URL http://www.sciencedirect.com/science/article/pii/S1075425316000028
DOI http://dx.doi.org/10.1016/j.intman.2016.01.001

Associations

People
Lindner, Thomas (Details)
Müllner, Jakob (Details)
Puck, Jonas (Details)
Organization
Institute for Export Management (Details)
International Business (Details)
Global Business and Trade DP (Details)
Competence Center for Emerging Markets and CEE WE (Details)
Institute for International Business IN (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5300 Economics (Details)
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