International Journal of

Business & Management Studies

ISSN 2694-1430 (Print), ISSN 2694-1449 (Online)
Foreign ownership and corporate debt policy in developing countries: evidence from Cameroon

Abstract


The objective of this paper is to build upon the evidences about the relationship between foreign ownership and corporate debt policy in the Cameroonian context. The study uses a simultaneous equations model on 238 companies observed in the period 2014-2018, and the three-stages least square (3SLS) estimation method to take into consideration the endogeneity problem. The results show that foreign ownership and total debt have a two-way non linear but concave relationship. That is, companies use more debt as foreign share increases. But, at higher levels of foreign participation, they reduce the level of their overall indebtness. The findings also show a scarce evidence about a convexe relationship between debt maturity and foreign share. At at low levels of foreign participation the relationship is negative, becoming positive at high levels. So, firms use more short-term debt as foreign share increases. However, at higher levels of foreign ownership, they switch their preferences to debts with longer maturity.