The Effect of Changes in The Ownership and Board of Directors of Companies Due to Foreign Direct Investments on the Cost of Debt: Application on BIST Manufacturing

Year 2020, Volume: 4 Issue: 3, 641 - 660, 20.09.2020

Murat Berberoğlu

https://doi.org/10.25295/fsecon.792411

Abstract

In this study, the effect of changes in the ownership and board structure of companies due to direct foreign investments on the cost of debt is examined. Manufacturing companies in Borsa Istanbul are included within the scope of the research. In this context, 43 companies have foreign shares in the ownership structure are included in the analysis. The data of the companies determined for the research between 2016-2019 were collected. In the research, the effect of foreign partnership shares, and the ratios of foreign members in the boards of directors on firms' cost of debt have been examined. According to the obtained results, a negative relationship is detected between the companies’ foreign ownership share and the cost of debt. In addition, a negative relationship was found between the ratio of foreign board members and the cost of debt of companies too. Accordingly, the increase in the foreign ownership share or the ratio of foreign board members of the companies decreases the cost of debt. Furthermore, a positive relationship is found between the cost of debt and the short-term debt percentage, whereas a negative relationship between the cost of debt and the firm size.

Keywords

Foreign Direct Investment, Foreign Ownership, Foreign Board Members, Cost of Debt

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