Dr. Rezaee to be Published in the International Journal of Auditing Technology
For release: August 28, 2015
Dr. Zabi Rezaee, Thompson-Hill Chair of Excellence and professor of Accounting, will be published in the International Journal of Auditing Technology for his paper entitled, "An empirical assessment of the effect of corporate international diversification on firm debt and value." The paper was coauthored with Kingsley O. Olibe, Kansas State University, and James C. Flagg, Texas A&M University.
This paper investigated whether a firm's foreign assets and foreign sales were associated with its leverage and excess firm value. The analysis, of a sample of 200 firms and 1,037 firm year-observations during the time period of 1998 to 2008, indicated a positive and significant relationship between long-term debt and foreign assets. Findings also showed that long-term debt is negatively related to foreign sales. These findings indicated that international involvement can significantly affect the size of debt in a firm's capital structure. Changes in firm value were positively related to international diversification, indicating that significant gains accrued for shareholders of internationally diversified firms. These results suggested that the mode of a firm's entry into foreign markets has different market implications for shareholders and debt-holders. Also found was that significant wealth gains accrued to shareholders of diversified firms with high or medium size debt structure, when taking into consideration of foreign diversification. These results have important implications on how firms design, operate, and manage their loan portfolio. The results were robust regarding the firm's debt and valuation characteristics and suggested that foreign operations do not destroy firm value.