CAPITAL STRUCTURE STRATEGIES OF MNCS DURING ECONOMIC DOWNTURNS
Abstract
This study provides an in-depth examination of financial decision-making in multinational corporations (MNCs) during economic downturns, with a focus on capital structure strategies and their evolution in response to financial crises. The research explores the relevance of fundamental financial theories in guiding corporate financial decisions. A central component of this study is a comprehensive historical overview of actual financial decisions made by corporations after 1970, analyzing key periods of economic distress and their implications on financial strategies. The study examines major global financial crises. By investigating the specific financial responses of corporations to these crises, the research identifies patterns in financial behavior, shifts in capital structure preferences, and the evolving role of debt and equity financing during times of economic uncertainty. One of the key insights derived from this research is the increasing reliance on debt-financed share buybacks, which has become a prominent financial strategy in recent decades. While classical financial theories traditionally emphasize the trade-offs between debt and equity, modern corporate finance has witnessed a growing trend of leveraging debt to repurchase outstanding shares, thereby enhancing per-share earnings and supporting stock prices.
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