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Geopolitical risk and offshore corporate bond issuance in local currency

Author

Listed:
  • Zhang, Qi
  • Wang, Ling
  • Sun, Xiaoxuan
  • Lin, Ning

Abstract

This study investigates the impact of geopolitical risk on the currency denomination of offshore corporate bonds. By analyzing a sample of listed firms across 27 economies from 2010 to 2023, we find that elevated geopolitical risk is associated with reduced offshore corporate bond issuance in local currency. This association is weaker in bonds with shorter maturity or higher credit rating, in firms with higher solvency, as well as in economies with higher income, greater social and economic development, and deeper derivatives markets. Meanwhile, tightened macro-prudential policies and monetary policy transparency help to mitigate GPR’s negative effect. Besides, heightened geopolitical risk leads to aggravated exchange rate volatility, rising risk premium, and increased corporate operational risk, thereby reducing offshore issuance in local currency.

Suggested Citation

  • Zhang, Qi & Wang, Ling & Sun, Xiaoxuan & Lin, Ning, 2025. "Geopolitical risk and offshore corporate bond issuance in local currency," Finance Research Letters, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325008153
    DOI: 10.1016/j.frl.2025.107556
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    Keywords

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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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