Do internationally cross-listed non-US firms obtain more favorable terms for syndicated loans?
AbstractPurpose – The purpose of this paper is to study the impact of cross-listing and cross-listing location on the terms of the private debt of firms not located in the USA. Specifically, the paper examines the empirical relationship between three syndicated loan terms (pricing, maturity and amount) at loan initiation and the cross-listed status of the borrower (cross-listed in the USA, UK, through depository receipts or not at all), while (not) differentiating between the stage of economic development of the borrower's home country. Design/methodology/approach – The three loan terms are modeled as a simultaneous system of equations and are estimated on a very extensive sample of 3,883 observations. The impact of endogeneity biases due to the sequential choices to and where to cross-list are examined using the inverse Mill's ratios from a bivariate probit model. Findings – All else held equal, foreign borrowers that are cross-listed directly in the UK obtain loans with higher spreads, longer maturities and larger loan amounts if they are from economically developed countries. Borrowers from emerging economies pay lower spreads but receive shorter maturities on syndicated loans if cross-listed in the UK. Cross-listings in the USA are not associated with any significant differential impacts on the three loan terms. Originality/value – This paper makes an important contribution to the cross-listing and capital structure literatures by providing evidence that the net benefit from being cross-listed for one debt component of the cost of capital (i.e. syndicated loans) depends on the listing destination and upon whether or not the borrower is from an emerging economy. The paper provides practical guidance to corporate financial officers on the benefits of international cross-listing and the choice of cross-listing venues on the terms of private debt issues.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Emerald Group Publishing in its journal Managerial Finance.
Volume (Year): 35 (2009)
Issue (Month): 7 (June)
Contact details of provider:
Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Doidge, Craig & Karolyi, G. Andrew & Stulz, Rene M., 2004.
"Why are foreign firms listed in the U.S. worth more?,"
Journal of Financial Economics,
Elsevier, vol. 71(2), pages 205-238, February.
- Craig Doidge & G. Andrew Karolyi & Rene M. Stulz, 2001. "Why are Foreign Firms Listed in the U.S. Worth More?," NBER Working Papers 8538, National Bureau of Economic Research, Inc.
- Baker, H. Kent & Nofsinger, John R. & Weaver, Daniel G., 2002. "International Cross-Listing and Visibility," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 37(03), pages 495-521, September.
- Lins, Karl V. & Strickland, Deon & Zenner, Marc, 2005. "Do Non-U.S. Firms Issue Equity on U.S. Stock Exchanges to Relax Capital Constraints?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(01), pages 109-133, March.
- Christian Koziol, 2006. "When does single-source versus multiple-source lending matter?," International Journal of Managerial Finance, Emerald Group Publishing, vol. 2(1), pages 19-48, January.
- Thomas, Hugh & Wang, Zhiqiang, 2004. "The integration of bank syndicated loan and junk bond markets," Journal of Banking & Finance, Elsevier, vol. 28(2), pages 299-329, February.
- Cantillo, Miguel & Wright, Julian, 2000.
"How Do Firms Choose Their Lenders? An Empirical Investigation,"
Review of Financial Studies,
Society for Financial Studies, vol. 13(1), pages 155-89.
- Miguel Cantillo and Julian Wright., 2000. "How Do Firms Choose Their Lenders? An Empirical Investigation," Research Program in Finance Working Papers RPF-256-Rev, University of California at Berkeley.
- Cantillo, Miguel & Wright, Julian, 2000. "HOw Do Firms Choose Their Leaders? An Empirical Investigation," Research Program in Finance, Working Paper Series qt8sd393sj, Research Program in Finance, Institute for Business and Economic Research, UC Berkeley.
- Miguel Cantillo & Julian Wright, 1998. "How Do Firms Choose Their Lenders? An Empirical Investigation," Finance 9803007, EconWPA.
- Marco Pagano & Ailsa A. Röell & Josef Zechner, 2002.
"The Geography of Equity Listing: Why Do Companies List Abroad?,"
Journal of Finance,
American Finance Association, vol. 57(6), pages 2651-2694, December.
- Pagano, Marco & Röell, Ailsa A & Zechner, Josef, 2001. "The Geography of Equity Listing: Why Do Companies List Abroad?," CEPR Discussion Papers 2681, C.E.P.R. Discussion Papers.
- Marco Pagano & Ailsa A. Roell & Joseph Zechner, 1999. "The Geography of Equity Listing; Why Do Companies List Abroad?," CSEF Working Papers 28, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Sep 2001.
- Gary Gorton & George Pennacchi, 1990.
"Banks and Loan Sales: Marketing Non-Marketable Assets,"
NBER Working Papers
3551, National Bureau of Economic Research, Inc.
- Gorton, Gary B. & Pennacchi, George G., 1995. "Banks and loan sales Marketing nonmarketable assets," Journal of Monetary Economics, Elsevier, vol. 35(3), pages 389-411, June.
- Merton, Robert C., 1973.
"On the pricing of corporate debt: the risk structure of interest rates,"
684-73., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-70, May.
- Sergei Sarkissian, 2004. "The Overseas Listing Decision: New Evidence of Proximity Preference," Review of Financial Studies, Society for Financial Studies, vol. 17(3), pages 769-809.
- Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
- Errunza, Vihang R. & Miller, Darius P., 2000. "Market Segmentation and the Cost of the Capital in International Equity Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(04), pages 577-600, December.
- Diamond, Douglas W, 1991. "Debt Maturity Structure and Liquidity Risk," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 709-37, August.
- Katerina Simons, 1993. "Why do banks syndicate loans?," New England Economic Review, Federal Reserve Bank of Boston, issue Jan, pages 45-52.
- Rene M. Stulz, 1999. "Globalization of Equity Markets and the Cost of Capital," NBER Working Papers 7021, National Bureau of Economic Research, Inc.
- Altman, Edward I. & Suggitt, Heather J., 2000. "Default rates in the syndicated bank loan market: A mortality analysis," Journal of Banking & Finance, Elsevier, vol. 24(1-2), pages 229-253, January.
- Jeffrey A. Wurgler & Malcolm P. Baker, 2001.
"Market Timing and Capital Structure,"
Yale School of Management Working Papers
ysm181, Yale School of Management.
- Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
- Flannery, Mark J, 1986. " Asymmetric Information and Risky Debt Maturity Choice," Journal of Finance, American Finance Association, vol. 41(1), pages 19-37, March.
- Dennis, Steven & Nandy, Debarshi & Sharpe, Lan G., 2000. "The Determinants of Contract Terms in Bank Revolving Credit Agreements," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 35(01), pages 87-110, March.
- Philip E. Strahan, 1999. "Borrower risk and the price and nonprice terms of bank loans," Staff Reports 90, Federal Reserve Bank of New York.
- Schure, Paul & Scoones, David & Gu, Qinghua, 2005. "A theory of loan syndication," Finance Research Letters, Elsevier, vol. 2(3), pages 165-172, September.
- Shahrokh M Saudagaran, 1988. "An Empirical Study of Selected Factors Influencing the Decision to List on Foreign Stock Exchanges," Journal of International Business Studies, Palgrave Macmillan, vol. 19(1), pages 101-127, March.
- Angbazo, Lazarus A. & Mei, Jianping & Saunders, Anthony, 1998. "Credit spreads in the market for highly leveraged transaction loans," Journal of Banking & Finance, Elsevier, vol. 22(10-11), pages 1249-1282, October.
- Diamond, Douglas W., 1993. "Seniority and maturity of debt contracts," Journal of Financial Economics, Elsevier, vol. 33(3), pages 341-368, June.
- Siegel, Jordan, 2005. "Can foreign firms bond themselves effectively by renting U.S. securities laws?," Journal of Financial Economics, Elsevier, vol. 75(2), pages 319-359, February.
- Gebhardt, William R. & Hvidkjaer, Soeren & Swaminathan, Bhaskaran, 2005. "The cross-section of expected corporate bond returns: Betas or characteristics?," Journal of Financial Economics, Elsevier, vol. 75(1), pages 85-114, January.
- Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, 09.
- Henderson, Brian J. & Jegadeesh, Narasimhan & Weisbach, Michael S., 2006.
"World markets for raising new capital,"
Journal of Financial Economics,
Elsevier, vol. 82(1), pages 63-101, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Louise Lister).
If references are entirely missing, you can add them using this form.