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Choice of currency in bond issuance and the international role of currencies

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Abstract

This paper investigates bond issuance of non-financial corporations in advanced economies during the period 1999-2003, attempting to understand motives for issuing in foreign currency, and determinants for the choice of currency. We consider the following influences on the currency choice when issuing foreign currency denominated debt: the microeconomic characteristics of the firm, the macroeconomic institutional environment and the financial particularities of the bond issue. We find that in addition to cost minimisation, hedging motives and the desire to establish an investor base influences the choice of currency. At the same time, market conventions and regulation also affect the choice. JEL Classification: C25, E44, F23, G32.

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 814.

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Length: 40 pages
Date of creation: Sep 2007
Date of revision:
Handle: RePEc:ecb:ecbwps:20070814

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Related research

Keywords: Bond issuance; Foreign currency denominated debt; Panel logit; nested logit; conditional logit.;

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Cited by:
  1. Paul Mizen & Frank Packer & Eli Remolona & Serafeim Tsoukas, 2012. "Why do firms issue abroad? Lessons from onshore and offshore corporate bond finance in Asian emerging markets," Working Papers 2012_16, Business School - Economics, University of Glasgow.
  2. Christian Thimann, 2009. "Global roles of currencies," Working Paper Series 1031, European Central Bank.
  3. Susan Black & Anella Munro, 2010. "Why issue bonds offshore?," BIS Working Papers 334, Bank for International Settlements.

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