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The Costs, Wealth Effects, and Determinants of International Capital Raising: Evidence from Public Yankee Bonds

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  • Darius P. Miller
  • John J. Puthenpurackal
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    Abstract

    This paper examines the costs, wealth effects, and determinants of international capital raising for a sample of 260 public debt issues made by non-U.S. firms in the U.S. (Yankee) market. We find that investors demand economically significant premiums on bonds issued by firms that are located in countries that do not protect investors' rights and do not have a prior history of on-going disclosure. The results provide support for the literature that suggests better legal protections and more detailed information disclosure increases the price investors will pay for financial assets. We also find that the average stock price reaction to Yankee bond offerings is significantly positive and that abnormal returns are largest for first-time Yankee bond issuers. In addition, we show that foreign firms tend to issue in the Yankee market when the relative interest cost is low, indicating that potential differences in borrowing costs influence where firms choose to sell bonds.

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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp445.pdf
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    Bibliographic Info

    Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 445.

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    Length: pages
    Date of creation: 01 Oct 2001
    Date of revision:
    Handle: RePEc:wdi:papers:2001-445

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    Keywords: Banking and Finance; Yankee bonds; International Capital Raising;

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    14. La Porta, Rafael & Lopez-de-Silanes, Florencio & Schleifer, Andrei & Vishny, Robert, 2001. "Investor Protection and Corporate Governance," Working Paper Series rwp01-017, Harvard University, John F. Kennedy School of Government.
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