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

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Author Info
Nikolaus Siegfried () (Thames River Capital LLP, 51 Berkeley Square, London W1J 5BB, United Kingdom.)
Emilia Simeonova () (Columbia University, 2960 Broadway, New York, NY 10027-6902, USA.)
Cristina Vespro () (ISS Governance Services - RiskMetrics Group, Chaussée de la Hulpe 181, B-1170, Brussels, Belgium.)

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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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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
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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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References listed on IDEAS
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  1. Estelle Cantillon & Pai-Ling Yin, 2007. "How and when do markets tip? Lessons from the Battle of the Bund," Working Paper Series 766, European Central Bank. [Downloadable!]
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  3. Giovanni Lombardo & David Vestin, 2007. "Welfare implications of Calvo vs. Rotemberg pricing assumptions," Working Paper Series 770, European Central Bank. [Downloadable!]
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  5. Reiner Martin & Ludger Schuknecht & Isabel Vansteenkiste, 2007. "The role of the exchange rate for adjustment in Boom and Bust episodes," Working Paper Series 813, European Central Bank. [Downloadable!]
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    Other versions:
  7. Marco J. Lombardi & Silvia Sgherri, 2007. "(Un)naturally low? Sequential Monte Carlo tracking of the US natural interest rate," Working Paper Series 794, European Central Bank. [Downloadable!]
    Other versions:
  8. Tommaso Proietti & Alberto Musso, 2007. "Growth accounting for the Euro area - a structural approach," Working Paper Series 804, European Central Bank. [Downloadable!]
  9. Marcel Fratzscher & Luciana Juvenal & Lucio Sarno, 2007. "Asset prices, exchange rates and the current account," Working Paper Series 790, European Central Bank. [Downloadable!]
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