IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Investor base and corporate borrowing: Evidence from international bonds

Listed author(s):
  • Massa, Massimo
  • Žaldokas, Alminas

We examine international bond issues by US firms to study the benefits of investor taste for cross-border security issuances. We proxy for firms' international investor taste with the fraction of prior international bond holding in firms' domestic and international bonds and find that international investor demand increases with such taste. Moreover, the offering yield spreads on international bonds are lower than domestic offering yield spreads for these internationally recognized firms and they have higher probability of issuing internationally. Such international recognition may occur, for instance, if the diversification benefits of adding the security to investor's portfolio outweigh the negative effects of higher renegotiation costs for international compared to domestic investors.

If 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.

File URL: http://www.sciencedirect.com/science/article/pii/S0022199613001104
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 92 (2014)
Issue (Month): 1 ()
Pages: 95-110

as
in new window

Handle: RePEc:eee:inecon:v:92:y:2014:i:1:p:95-110
DOI: 10.1016/j.jinteco.2013.11.002
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

References listed on IDEAS
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.:

as
in new window


  1. Geert Bekaert & Campbell R. Harvey, 1997. "Foreign Speculators and Emerging Equity Markets," William Davidson Institute Working Papers Series 79, William Davidson Institute at the University of Michigan.
  2. Richard Portes & Helene Rey, 2000. "The determinants of cross-border equity flows," LSE Research Online Documents on Economics 20203, London School of Economics and Political Science, LSE Library.
  3. Mayer, Colin, 1988. "New issues in corporate finance," European Economic Review, Elsevier, vol. 32(5), pages 1167-1183, June.
  4. Tille, Cédric & van Wincoop, Eric, 2010. "International capital flows," Journal of International Economics, Elsevier, vol. 80(2), pages 157-175, March.
  5. Miller, Darius P. & Puthenpurackal, John J., 2005. "Security Fungibility and the Cost of Capital: Evidence from Global Bonds," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(04), pages 849-872, December.
  6. Errunza, Vihang R & Senbet, Lemma W, 1984. " International Corporate Diversification, Market Valuation, and Size-Adjusted Evidence," Journal of Finance, American Finance Association, vol. 39(3), pages 727-743, July.
  7. Yakov Amihud & Haim Mendelson & Jun Uno, 1999. "Number of Shareholders and Stock Prices: Evidence from Japan," Journal of Finance, American Finance Association, vol. 54(3), pages 1169-1184, 06.
  8. Boot, Arnoud W A & Thakor, Anjan, 1997. "Can Relationship Banking Survive Competition?," CEPR Discussion Papers 1592, C.E.P.R. Discussion Papers.
  9. 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.
  10. Brennan, Michael J & Cao, H Henry, 1997. " International Portfolio Investment Flows," Journal of Finance, American Finance Association, vol. 52(5), pages 1851-1880, December.
  11. Joseph Chen & Samuel Hanson & Harrison Hong & Jeremy C. Stein, 2008. "Do Hedge Funds Profit From Mutual-Fund Distress?," NBER Working Papers 13786, National Bureau of Economic Research, Inc.
  12. Dhrymes, Phoebus J. & Lleras-Muney, Adriana, 2006. "Estimation of models with grouped and ungrouped data by means of "2SLS"," Journal of Econometrics, Elsevier, vol. 133(1), pages 1-29, July.
  13. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
  14. Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 393-414.
  15. Simi Kedia & Abon Mozumdar, 2003. "Foreign Currency Denominated Debt: An Empirical Examination," The Journal of Business, University of Chicago Press, vol. 76(4), pages 521-546, October.
  16. Cai, Fang & Warnock, Francis E., 2005. "International diversification at home and abroad," Discussion Paper Series 1: Economic Studies 2005,06, Deutsche Bundesbank, Research Centre.
  17. Adler, Michael & Dumas, Bernard, 1975. "Optimal International Acquisitions," Journal of Finance, American Finance Association, vol. 30(1), pages 1-19, March.
  18. Hotchkiss, Julie L, 1991. "The Definition of Part-Time Employment: A Switching Regression Model with Unknown Sample Selection," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(4), pages 899-917, November.
  19. Lee, Lung-Fei, 1978. "Unionism and Wage Rates: A Simultaneous Equations Model with Qualitative and Limited Dependent Variables," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 415-433, June.
  20. Amemiya, Takeshi, 1984. "Tobit models: A survey," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 3-61.
  21. Merton, Robert C, 1987. " A Simple Model of Capital Market Equilibrium with Incomplete Information," Journal of Finance, American Finance Association, vol. 42(3), pages 483-510, July.
  22. Karolyi, G. Andrew, 2004. "The World of Cross-Listings and Cross-Listings of the World: Challenging Conventional Wisdom," Working Paper Series 2004-14, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  23. Matthew R. McBrady & Sandra Mortal & Michael J. Schill, 2010. "Do Firms Believe in Interest Rate Parity?," Review of Finance, European Finance Association, vol. 14(4), pages 695-726.
  24. Mihir A Desai & Dhammika Dharmapala, 2011. "Dividend Taxes and International Portfolio Choice," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 266-284, February.
  25. Jerry T. Parwada & Joey W. Yang, 2009. "Information Diffusion among International Fund Managers: Multicountry Evidence," Financial Management, Financial Management Association International, vol. 38(4), pages 817-835, December.
  26. John D. Burger & Francis E. Warnock, 2006. "Foreign Participation in Local Currency Bond Markets," NBER Working Papers 12548, National Bureau of Economic Research, Inc.
  27. Sharpe, Steven A, 1990. " Asymmetric Information, Bank Lending, and Implicit Contracts: A Stylized Model of Customer Relationships," Journal of Finance, American Finance Association, vol. 45(4), pages 1069-1087, September.
  28. Susan Chaplinsky & Latha Ramchand, 2000. "The Impact of Global Equity Offerings," Journal of Finance, American Finance Association, vol. 55(6), pages 2767-2789, December.
  29. 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.
  30. Siegfried, Nikolaus & Simeonova, Emilia & Vespro, Cristina, 2007. "Choice of currency in bond issuance and the international role of currencies," Working Paper Series 0814, European Central Bank.
  31. Rene M. Stulz, 2005. "The Limits of Financial Globalization," NBER Working Papers 11070, National Bureau of Economic Research, Inc.
  32. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-161, January.
  33. Stavros Peristiani & Joao A. C. Santos, 2010. "Has the US Bond Market Lost its Edge to the Eurobond Market?," International Review of Finance, International Review of Finance Ltd., vol. 10(Financial), pages 149-183.
  34. Ahearne, Alan G. & Griever, William L. & Warnock, Francis E., 2004. "Information costs and home bias: an analysis of US holdings of foreign equities," Journal of International Economics, Elsevier, vol. 62(2), pages 313-336, March.
  35. Reena Aggarwal & Leora Klapper & Peter D. Wysocki, 2003. "Portfolio preferences of foreign institutional investors," Policy Research Working Paper Series 3101, The World Bank.
  36. Jun-Koo Kang & Jin-Mo Kim, 2010. "Do foreign investors exhibit a corporate governance disadvantage? An information asymmetry perspective," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(8), pages 1415-1438, October.
  37. Kenneth A. Froot & David S. Scharfstein & Jeremy C. Stein, 1992. "Risk Management: Coordinating Corporate Investment and Financing Policies," NBER Working Papers 4084, National Bureau of Economic Research, Inc.
  38. Kim, Woochan & Sung, Taeyoon & Wei, Shang-Jin, 2011. "Does corporate governance risk at home affect investment choices abroad?," Journal of International Economics, Elsevier, vol. 85(1), pages 25-41, September.
  39. Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 7-25, January.
  40. Miller, Darius P. & Puthenpurackal, John J., 2005. "Security fungibility and the cost of capital: evidence from global bonds," Working Paper Series 0426, European Central Bank.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:inecon:v:92:y:2014:i:1:p:95-110. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.