International intensity, regional dispersion, and institutional distance: How a multinational configuration shapes capital structure

Abstract

This study examines how international expansion shapes firms’ capital structure decisions. Going beyond traditional measures of internationalization, our multidimensional perspective distinguishes between the scale of foreign operations (international intensity), the breadth of geographic engagement (regional dispersion), and the institutional distance between home and host countries. Drawing on co-insurance theory and organizational institutionalism, we argue that these dimensions interact to influence firms’ leverage decisions. Using panel data from 215 listed firms across 16 European countries (2010–2020), we find that internationalization is associated with lower long-term debt levels. This negative effect is especially pronounced when firms operate across multiple global regions or in institutionally distant environments. These findings suggest that the risks and coordination challenges associated with regional dispersion and institutional heterogeneity outweigh potential diversification benefits, prompting firms to adopt more conservative capital structures. To address endogeneity, we apply a system GMM estimator and visualize key interaction effects using average marginal effects. The results underscore that, when assessing the financial consequences of global expansion, both practitioners and scholars must consider the structural configuration of a firm’s international footprint, not merely its intensity.