Multinationality as a Moderator of National Institutions: The Case of Culture and Capital Structure Decisions

Literature in international business and finance share the belief that country‐level institutions affect the decisions of corporations. In this study, we highlight the other side of the picture and propose that MNCs can moderate the impact of the national institutions of a country. Unlike previous studies, we treat culture not only as an explanatory variable but also as a moderator. We posit that multinationality moderates the influence of national culture on corporate financial leverage. Using a large panel data set of 50 countries, we show that the multinationality of a firm decreases the impact that national culture has on its capital structure. Additionally, our study makes another significant contribution by establishing existing cultural dimensions as economically and statistically significant determinants of capital structure.