2015协作组会议英文12financial leverage and market decision foreign expansion of companies from emerging-study chinese manufacturing sector中央财经

FinancialLeverageandMarketDecisioninForeignExpansionofCompaniesfromEmergingMarket:AStudyof DaHUOCentralUniversityofFinanceandEconomicsZhuCHENCentralUniversityofFinanceandWithfurtherinvolvementinglobaltradingactivities,companiesfromemergingmarketshaveenhancedtheircompetitioninforeignbusinessestoavarietyofdestinations.Thefinancialleveragepowerisanimportantsupporttotheforeignmarketexpansion.Itisimportanttofurtherunderstandtheeffectoffinancialleverageonthemarketdecisionsinforeignexpansionofcompaniesfromemergingmarket.This yzesthevaryingdecisionofforeignmarketsinforeignexpansionofcompaniesinmanufacturingsectorbysystematiccluster ysis,andthisresearchfurtherrevealstheeffectoffinancialleverageondecisionofforeignmarketsbasedonmultinomiallogitregression,withthefurtherestimationofprobabilitiesforforeignmarketdecisionsby manufacturingsectorfirms.Theresultofthisresearchishelpfulforglobalmarketmanagersandfinancialmakersintheirfuturedecisionsoffinancialresources.KeyWord:FinanceLeverage,MarketDecisioninForeignExpansion,CompaniesfromEmergingMarket究通过多值选择Logit模型对财务杠杆在企业拓展海外市场的选择中产生的作用进行了探讨，并制造企业拓展海外市场的选择可能性进行了估计。的DaHUO地址市海淀区学院南路39号财经大学主教楼719(100081)ZhuCHENVernon(1979)pointedoutthatdevelopedcountriesinitiallycreatednewproductsandexportedtodevelocountries.Whilethecompetitionincreasesindevelopedcountries,productionactivitiesaregraduallyshiftedtodevelocountries.Astheproductionisshiftedtodevelocountries,thedevelocountrieschangedtoexportersanddevelopedcountriesareturnedtobeimporters.Followingtheshiftofproductionactivitiesfromdevelopedcountriestodevelocountries,theinternationalizationof companiesisgraduallyincreasedbytheexportacrossdifferentcountries.Duetothedemandoffinancialsupporttotheforeignexpansion,thefinancialleveragecanbeanimportantfactorthatinfluencesthedecisionofforeignmarketsforcompaniesfromemergingmarkets.initiatedeconomicreformin1978andhasmadetremendouseffortstotransitionfromannedeconomytoamarket-orientedeconomy.Withthederegulationofthecentral-nningeconomyandtheemergenceofmarkets,theoperationsofthe internationalcompanieshavebeendeterminedbymarketdemandandsupply.Therelaxationofcontrolofproductionincreasedthediversificationofcompanies duringthetransitioneconomy(Lietal.,hasachievedahighgrowthrateintheeconomicdevelopment. actastheregulatorsthathaveahighlevelofcontrolpowerof companies.Differentagenciesstructureregulationscouldalsobuildpoliciestoprotectthepowerintheirregulatory .The ernmentinfluenceandregulatorypoliciescouldincreasethecomplexityanduncertaintyintheoperationsofcompanies.Thecompetitiveadvantagesofthehighlevelofdiversificationinthedomesticcompaniescouldhelpthefirmstodevelopthecostleadershipandproductdifferentiationsothatthefirmscoulddiversifywithmoreintegratedoperationsandlargermarketshare.Theopenof hasincreasedthecompetitionof andforeigninvestors.Withtheopenreform,anincreasingnumberofforeigncompanieshavetakenadvantageofaninexpensivelabor andmarketdemandthroughthe1.3billionpopulationof .ThiscompetitionisincreasedafterenteredWTOin2001andthechallengesthatcomefromtheemergenceofprivatesectors,growthofforeigncontrolledbusiness,andderegulationsofthebusinessenvironment.Increasingcompetitionhasdrivendownthemarginsofcompaniesinthedomesticmarket.Alotof companiesmustlearntocompeteintheglobalmarketceastheeconomyisfurtherintegratedwiththeglobalcompetition.Thesuccessoftheexportdriveneconomy,towhichforeignenterprisesinhavebeenmajorcontributors,hasinturnfurtheredtheoutwardFDIofthecountry(Robert,2002).companieshaveincreasedtheirglobalexpansionwiththeincreasedtradeandtheserviceasthemanufacturingntoftheworldmarket.Therefore,domesticconstraintsandthepressuresofglobalcompetitionhaveprovidedthedynamicsforcompaniesinforeignmarkets(Child&Rodrigues,2005).Ascompaniesareenhancingtheinternationalizationlevel,thedecisionofforeignmarketsalsovariesacrossdifferentcountries.Thefinancialleverageisanimportantfactorintheinternalizationofcompaniesfromemergingmarkets,anditisimportanttohaveafurtherunderstandingofeffectsoffinancialleverageondecisionofmarketsinforeignexpansionbycorporatefromemergingmarkets.Decisionsofthemarketsinforeignexpansioncanbeestimatedinyzing companiesbasedontheirfinancialleveragepower.Thisresearchrevealstheeffectoffinancialleverageondecisionofforeignmarkets,andtheresultishelpfultoglobalmarketmanagersandfinancialmakersintheirdecisionsoffinancialresources.LitureSrivastava(2014)pointedoutthatthedebttotheequityratiocanrepresentthefinancialleverageofa ,anditreflectsthecapacityofthefinancialmanagerstoattractexternalfinancialresourcesforimprovementoftheequityefficiency.Thefinancialleveragecanhelpthe toincreaseitsgrowthopportunity,butitalsoincreasesthefinancialriskthe .A canattractexternalresources,especiallywhenitgoesthroughaboomperiodanditneedsadditionalfinancialresourcesinordertosupportit,butthisalsomakesitriskier.Andanincreasinglevelofriskissimilartoincreasingthecostofotherexternalresourcesleadingtothedangeroffailurearea.Itisacrucialissueforglobalmanagersthathowtochoosethecombinationofdebtandequitytoachieveoptimumcapitalstructureforminimizingthefirm'scostofcapitalandimprovingreturntoownersofthebusinessindecisionsofforeignmarketexpansion.Theoptimaldebtlevelbalancesthebenefitsofdebtagainstthecostsofdebtindecisionsofglobalexpansion.Accordingtoresource-basedview,firmsobtainsustainedcompetitiveadvantagesbyexploringinternalstrengths.Firmresourcesincludetheassets,capabilities,organizationalprocesses,firmattributes,information,andknowledgewhicharecontrolledbyafirmandenablethefirmtoimproveitsefficiencyandeffectiveness.Iffirmshavethesameresources,itishardforanyofthemtobuildcompetitiveadvantage.Toimplementstrategiesbeforeothercompetitors,afirmhastofindtheopportunitiesthathavenotbeenfoundbyotherfirmsintheindustry.Firmresourcesthatcreatecompetitiveadvantagesneedtobevaluable,imperfectlyimitable,andnotsubstitutable(Barney,1991).The companiescouldbuildtheircompetitiveadvantagesthroughexpansiontoforeignmarketsintheglobalpaniescompeteintheglobalmarketwiththecompetitiveadvantagesdevelopedinthedomesticmarket. companiesimprovedthetechnologyandmanagementskillsincooperationwithforeigncompanies.Takingadvantagesoftheprestigiousbrandequitybuiltupinthedomesticmarket,companiesmovedabroadwiththeirbargainingpowerincreasedintheglobalcompetition.Butthecostincreasedfromthediversificationcouldmakethetransactioncostintheglobalexpansiondifficultto paniescouldalsobechallengedbyresourcelimitationsandtheproblemsintransnationalmanagementandcommunications.Ontheotherhand,thediversificationthatcompanieshaveintheglobalmarketcouldhelpthecompaniestodevelopcompetitiveadvantagesandenlargethemarketshare.Therefore,diversificationandinternationalizationcouldbeatrade-offtoH1:ThefinancialleveragecanhaveapositiverelationshipwithdecisionofforeignmarketexpansionMarketexpansioncanhaveapositiveimpactonperformancebyallowingfirmstomakebetteruseoftheresourcesofacorebusiness.Theexpansionofoperationsleadstobetterall-aroundmanagementinthe ,performance,andshareholderwealthenhancement.Asaresultofthedifferenceofsales,globalfirmswithmarketpowerperformbetterthandiversifiedfirmsthatarenotmarketleaders.Themarketexpansionhasasignificantandpositiveinfluenceonthevalueofthefirm.(Ramanujam&Varadarajan,1989)H2:ThefinancialleveragecanhaveanegativerelationshipwithdecisionofforeignmarketexpansionMarkidesandWilliamson(1996)foundthatexpansionindifferentmarketscansupportsuperiorreturnsonlywhenitallowsafirmtoexploitresourcesorassetsthatareunavailabletoitsrivalsatacompetitivecost.StimpertandDuhaime(1997)pointedoutthattheexpansionofinternationalcompaniesassociatedwithadministrativecomplexitygrowsoquicklytheycansoonoverwhelmanypotentialeconomiesofscaleorscopeofferedbyproductdiversification.H3:ThefinancialleveragecanhaveaU-shaperelationshipwithdecisionofforeignmarketexpansionInternationalcompanieswillconferadvantageoverdomesticfirms.Internationalfirmshaveopportunitiestogaingreaterreturnstointangibleresources,tousemarketpower,tospreadtheirmarketrisks,andtoseeklessexpensiveinputsandlessprice-sensitivemarkets.Theinternationalcompanieshavegreateropportunitiestoleverageresourceswhileloweringmarketrisks,thusraisingitsperformance.Theinternationalizationhashelpedtoimproveoperatingperformance.However,afirmwithprofit-makingcapabilitieswillseekadditionalprofitsininternationalmarketlocations.Thisexpansionmaybelimitedbyrelatedproductscopeexpansionofglobalmarket.Experienceininternationalmarketspermitsfirmstograduallyincreasetheircommitmenttointernationalexpansion.Theabilitytomanageextensivenetworksofinternationalsubsidiariesatlowtransactionalcostsseemstobeakeycapabilityofsuccessfulmultinationalfirms(Tallman&Li,1996).H4:ThefinancialleveragecanhaveanS-shaperelationshipwithdecisionofforeignmarketexpansionAccordingtothetransactioncosttheory,theinternationalcompanieswillfinditdifficultto etheircostintheinitialstageofforeignoperations.Ahigherleveloftransactioncostwilllowerthepositivefirmperformanceintheglobalexpansionofcompanies(Bobilloetal.,2010).Thefinancialleverageofcompanieswillhaveanegativerelationshipwiththedecisionofforeignexpansionforthereasonthatthedistributionandtechnologybarrierintheforeignmarketscanincreasetransactioncostduetotheuncertaintyofdifferentenvironmentsintheglobalmarketandfurtherraisesthefinancialrestrainofthecompanies.Whenthefinancialleveragepowerfurtherincreasesinglobalexpansion,theinternationalcompaniescanarbitrageacrossfactormarketsandleveragetheirmarketpowertobothreduceinputcostsandcontroloutputmarkets(Tallman&Li,1996).Thefinancialleveragecanhavepositiveeffectondecisionofforeignexpansionasthefirmresourcesaccessedinglobalexpansioncanofferstrengthsforfirmstoimplementtheirstrategies(Porter,1981).Firmsinvolvedinafurtherhigherleveloffinancialleverageinglobalexpansionmayneedtoconfrontthedifficultiesinmanagingdifferentcultures,operationsindifferentcountries,andservicetodifferentcustomers.Thustheinternationalcompaniescanresultinincreasedmanagerialconstraintsandhighercross-borderadministrativecosts.Themanagerialcomplexityarisesfromoperationsindifferentmarketswithproblemsincommunication,coordination,controlandmotivation(Doukas&Kan,2006).AndthecostoffinancialleveragecanaffectthedecisionofforeignexpansioninglobalResearchThedestinationsofforeignexpansionby companiesinmanufacturingsectincludeAsia,Europe,NorthAmerican,SouthAmerican,Oceania,Africa,andMid-East.Thedecisionsofforeignmarketsareclusteredinthreegroupsbysystematic ysis.Themultinomiallogitregressionisperformedto yzetherelationshipbetweenfinancialleverageanddecisionofforeignexpansionbycompaniesinmanufacturingsector.ThedependentvariableisthedecisionofCluster1,Cluster2andCluster3inforeignmarketexpansion.Theindependentvariablesincludethefinancialleverage,measuredbydebttoequityratio,squarefinancialleverageandcubicfinancialleverageof companiesinmanufacturingsector.LiandWong(2003)pointedoutthatthefinancialleverage,whichequalstotheratioofdebttoequity,reflectstheinfluencesfromdebtholdersandshareholdersandtheimpactstotheperformanceofthefirms.Thecontrolvariablesincludefirmsize,wagelevelandR&Dexpense.FinancialLeverageandFirmGilletal.(2012)findthatsmallbusinesscompaniescanbepositiveinfluenceonthefinancialleverageofsmallbusinessfirmsin.Theleveragerelatedcostscanproduceanoptimalcapitalstructureasthetaxadvantageistradedagainstthelikelihoodofincurringbankruptcycosts.Thecompanieswithsmallersizemayprefernottousedebt,forthereasonthatsmallerfirmsmakelessprofitthanthelargerfirms.Alsousinglowerleverdebtisthatthepotentialofbankruptcyishighforthesmallfirmsiftheyincreasethelevelfinancialleverage.Theagencycostscanbeexpectedriseinsmallerfirmsasasmallbusinessmanagerismorelikelytoputhisownandhisventure'sinterestfirst,especiallyintheearlyyearswhensurvivalisatstake.Inaddition,smallbusinessescarrylessdebtthanthelargerfirmsduetohigherbankruptcycosts,andgreatercostsinresolvingthelargerinformationalasymmetries.Therefore,thecompanieswithasmallerfirmsizecanbemorerestrainedindecisionofforeignmarketexpansionduetothelimitationoffinancialpower,andthelargecompaniescanbemorerelaxedinglobalexpansionwithahigherleveloffinancialsupport.Firmsizeismeasuredasthelogoftotalassetsinthisstudy(Li&Wong,2003).FinancialLeverageandDevelopmentofTheabilityofinternationalcompaniestoexploittheknowledgeindeveloavarietyofforeignmarketsisimportantforthecompaniestocreatecompetitiveadvantages.Thedevelopmentofnewtechnologyinthediversificationprocessisimportantfortheinternationalcompaniesinordertodevelopnewcompetencesandachievehigherperformance.Theknowledgelearnedfromglobalexpansiontoadapttodifferentcustomersanddemandscouldhelpinternationalcompaniestoadapttheirproductstodifferentmarkets.Globalexpansionalsooffersthedynamicsfortheinternationalcompaniestoidentifyemergingtechnologicalchangesandthesynergiesandadvantagesforthecompaniestoadaptnewmarkets.Diversificationofinternationalcompaniescouldimprovethetechnologybreathanddepthofcompaniesintheglobalexpansion.Thiscouldbehelpfultothecompaniestoacquirenewtechnologyacrossdifferentcountries((Zahraetal.,2000).ThefinancialleveragepowercanfurtherenhancethedevelopmentofR&Dofcompanies.ButAhmad,Khursheedetal.(2013)foundthatthefinancialleveragehassignificantnegativeimpactoninvestmentofcompanies,andthefirm’sinvestmentdecreasesasleverageincreases.Thehighlyleveragedfirmsinvestless,whiletheleverage overinvestmentbiasandattenuateagencyproblemexist.Therefore,thecompanieswithalowerlevelR&Dexpensecanberestrainedinglobalexpansionduetolimitedfinancialresources,andthecompanieswithahigherlevelofR&Dexpensecanberelaxedinglobalexpansionwithastrongfinancialsupport.FinancialLeverageandWageHeisz,Andrew&LaRoc e-Cote,Sebastien(2004)examinedtherelationshipbetweenfirmleverageandstabilityinemploymentandinventoriesusingCanadiandataforthemanufacturingsector.Thecompaniesneedtofindnewfundstofinancebusinessactivities,andahealthybalancecanoffercompanieseasyaccesstoexternalfinance,tosmoothproductionbybuildingupinventories.Firmswithahighlyleveragecanpreferhigherdebttorespondquicklytochangesintheeconomicenvironment.Thecompanieswithdifficultyinobtainingoutsidefinancecanmakeitsemploymentmoresensitivetotheavailabilityofinternalfunds.Therefore,thefirmswithhighleveragecanbemorelikelytodownsizetheirlabor inthecaseofdecliningproductdemandthanotherfirms.Andalsothecompaniesthatarerestrainwithfinancialresourcescantakeadvantagesoflowerwage-levelinglobalexpansion.Thedataiscollectedfromannualfinancialreportof listedcompaniesinmanufacturingsectorfrom2012to2014.Thecompaniesrefertothefirmswhosebusinessspanacrossnationalborders.Thedataistransformedbythelogarithmfortheregressionysis.Thedatatransformationcouldhelpthevariablestocorrectviolationsofthestatisticalassumptionswiththemultivariatetechniques.Thedatacanbetransformedwiththelogarithmsofthevariables,anditishelpfultofindthenormalityofthevariablesinbuildingthelinearrelationshipsofthevariable.TheprobabilityofdecisionsinforeignmarketexpansionforcompaniesinmanufacturingsectorisfurtherestimatedbasedonthemultinomiallogitregressionFigure1showstheresultofsystematiccluster ysisfordecisionsofforeignmarketsinglobalexpansionof companies.ThecompaniesaregroupedintothreedifferentclustersbasedontheirdecisionsofforeignmarketsinAsia,Europe,NorthAmerica,SouthAmerica,Oceania,AfricaandMid-East.Theredrectangularhasstressedthethreegroupsofcompaniesinthesystematiccluster ysis.Figure2furthershowstheheatmapofcompaniesinthecluster ysis.Thedeepercolorinthemappresentsthehigherlevelofsimilaritiesofthedecisionsinforeignmarketexpansion.Table1showstheresultofmultinomiallogitregressionbasedonmanufacturingcompanies.Itrevealstherelationshipbetweenfinancialleverageanddecisionsofforeignmarketexpansion.Model1teststherelationshipbetweenfinancialleverageanddecisionofforeignmarketexpansionindifferentclusters,withCluster3asthestandardgroup,andthecontrolvariablesincludefirmsize,R&Dandwagelevelof companies.Model2addsthein ctionsbetweenfinancialleverageandfirmsize,R&Dandwageleveltotheregression ysis.Model1andModel2showsthatH2issupported,whileH1isnot.ThefinancialleveragehasanegativerelationshipwithdecisionsofforeignmarketexpansionforcompaniesinCluster2.Model3teststheU-shaperelationshipbetweenfinancialleverageanddecisionofforeignmarketexpansion,andModel4furtheraddsthein ctionsbetweenfinancialleverageandthefirmsize,R&Dandwageleveltotheregression ysis.Model3andModel4showsthatH3isnotsupported.Furthermore,Model5teststheS-shaperelationshipbetweenfinancialleverageanddecisionofforeignmarketexpansion,andModel6addsthein betweenfinancialleverageandthefirmsize,R&Dandwageleveltotheregressionysis.Model5andModel6showthatthereisanS-shaperelationshipbetweenfinancialleverageanddecisionofforeignmarketexpansion,andH4issupported.Itisalsofoundthatthein ctionbetweenfinancialleverageandfirmsizehasapositiverelationshipwiththedecisionofforeignmarketexpansionforcompaniesinCluster1,andthein ctionbetweenfinancialleverageandwagelevelhasanegativerelationshipwiththedecisionofforeignmarketexpansionforcompaniesinbothCluster1andClusterTheperformanceofmultinomiallogitregressionysisismeasuredbytheprobabilitiesofcorrectclassification(PCC),whichisbasedontheprobabilityofcorrectestimationsbyrandomselectedsampletests.ItisshownthatModel6hasthehigherprobabilityofcorrectclassification,andtheestimationofdecisionsinforeignmarketexpansionisbasedonModel6,andFigure3showstheprobabilityofcorrectclassificationinModel6.Figure4furthershowstheaverageprobabilitiesofdecisionsinforeignmarketexpansionformanufacturingcompaniesinCluster1,Cluster2,andCluster3,anditisfoundthatcompaniesinCluster1hasthehighestprobabilityindecisionofforeignexpansion.Figure5showsthekerneldensityofestimatedprobabilitiesindecisionsofforeignmarketexpansion.Withthedevelopmentofemergingeconomy,companiesfromemerginghaveenhancedinvolvementofglobalcompetition.Itisimporttodevelopafurtherunderstandingofrelationshipbetweenfinancialleverageanddecisionsofforeignmarketexpansionforcompaniesinemergingmarkets.Thisresearchstudiestheeffectoffinancialleverageondecisionsforforeignmarketexpansionbasedoncompaniesinmanufacturingsector.ItisfoundthatthefinancialleveragehasanS-shaperelationshipwithdecisionofforeignmarketexpansion.Thecompaniescanberestrainedbylimitationsoffinancialresourcesatinitialstageofglobalexpansion,andtheforeignexpansioncanbeencouragedbyahigherleveloffinancialleverage.Butthecostofanevenhigherleveloffinancialleveragecanoffsetthebenefitinglobalexpansion.Therefore,itisimportanttomanagethefinancialleverageinareasonablelevelsothatitsadvantagesanddisadvantagescanbebalanced.Inaddition,the ctionbetweenfinancialleverageandfirmsizehasapositiverelationshipwiththedecisionofforeignmarketexpansion,andthiscanbearesultofgreaterfirmresourcesinsupporttotheglobalexpansion.Alsothein ctionbetweenfinancialleverageandwagelevelhasanegativerelationshipwiththedecisionofforeignmarketexpansion,anditisshownthatthecompaniesfromemergingmarketsthatarerestrainedwithfinancialresourcescanalsotakeadvantageoflowerwagelevelindecisionsofforeignmarketexpansion.Ahmad,Khursheed&Alishah,SyedZulfiqar&Bilal,Hazrat&Ahmad,Habib(2013),ImpactofFinancialLeverageonFirmInvestment,AfricanJournalofBusinessManagement,7(14),1115-1125Barney,J.(1991).FirmResourcesandSustainedCompetitiveAdvantage,JournalofManagement,17(1),99~121Bobillo,AlfredoM.&Iturriaga,FelixLopez&Gaite,FernandoTejerina.(2010).FirmPerformanceandInternationalDiversification:TheInternalandExternalCompetitiveAdvantages.InternationalBusinessReview,19(6),607-618Child,John&Rodrigues,SuzanaB.(2005),TheInternationalizationof ACaseforTheoreticalExtension,ManagementandOrganizationReview,Volume1,Issue3,381-410Coucke,Kristien,&Sleuwaegen,Le