ABSTRACT
FUNDING a foreign subsidiary operation of a multinational corporation can be done through a variety of sources and financial instruments. The choice among the various alternatives is determined by availability, cost, risk, and the parent company's capital structure considerations. The subsidiary funding must, however, accommodate all of the host country's legal and financial requirements. This chapter examines the general principles of funding a foreign subsidiary or affiliate with debt versus equity; reviews the sources of funds, both internal and external, and examines the implications of the multinational corporation's overall financial strategies. It concludes by reviewing some empirical evidence on the financial structure of overseas subsidiaries and U.S. corporations.
