Degree of Internationalization, Financial Structure and Cost of Capital: Evidence from Emerging Taiwan

The debt structure of companies in Developing and Emerging Economies (DEEs) is significantly different from that of companies in the developed countries. This study examines the effect of degree of internationalization (DOI) on leverage ratio (LEV) and cost of capital (COC) in DEE setting by using a sample of Taiwan listed companies.  Our results show that DOI has a significant positive impact on short-term debt as well as a significant negative impact on long-term debt. Therefore, it appears that DOI has a substitution effect in DEE companies. In summary, our results indicate that DEE firms do not have the advantage of participating in the international financial market.