Effects of Thin Capitalization and International Law on Performance of Multinational Companies in Nigeria

Abstract

The use of leverage as finance strategy has become a tool of performance enhancement among corporate organisations. The study was carried out to examine the effects of thin capitalization and international laws on performance of multinational companies in Nigeria. Ten Samples were drawn from 17 multinational companies quoted on the Nigerian stock exchange. The expo-facto design was adopted, since the variables used existed in the company’s financial report covering the period of 2012-2016. Data were gathered using on-line retrieval method. The analysis technique used was the multiple regression. Research results indicated that thin capitalization is revenue stripping techniques but it affects performance of multinational companies in Nigeria. The study therefore recommended among others that Government should design a framework that will limit debt-toequity ratio of multinational companies operating in Nigeria, since it has become imperative that companies used high leverage to generate and shift earnings without having carefully managed the accompany problems of financial distress.