Institutional Distance and Subsidiary Debt : The Spillover Effect of Home Country Institutional Quality

This study examines the spillover effects of home country institutional and cultural characteristics on the subsidiaries operating in France while they are in the process of making capital structure choices and debt maturity choices. We document that while subsidiaries financing choices are partially explained by standard determinants, at the same time, these choices are impacted by cultural distance factors such as economic, financial, and political distance. Namely, cultural distance is one of the essential determinants of the long-term debt proportion in the total amount of debt used for the financing of foreign subsidiaries in France