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International evidence on the cost of public debt issued by private versus public firms

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  • Liu, Lewis
  • Clarkson, Peter

Abstract

In this study, we revisit the relation between ownership type (public versus private) and the cost of public debt. Based on the literature, we seek insights into the conditions under which private firms should expect to pay a premium and when, alternatively, they might expect to enjoy a cost benefit on issues of public debt relative to public firms. Using an international sample of 630,959 traded bond issues from 2001 to 2017, we initially confirm a higher cost of public debt for the private U.S. firms in our sample. Following, we alternatively confirm a lower cost of public debt for the private non-U.S. firms. Finally, we confirm that, for non-U.S. issuers, the benefit is reduced in jurisdictions with stronger institutional and regulatory frames. Additional tests (alternative econometric approaches, alternative partitions, and firms undertaking an IPO) provide further support.

Suggested Citation

  • Liu, Lewis & Clarkson, Peter, 2025. "International evidence on the cost of public debt issued by private versus public firms," Pacific-Basin Finance Journal, Elsevier, vol. 92(C).
    • Handle: RePEc:eee:pacfin:v:92:y:2025:i:c:s0927538x25001349
    DOI: 10.1016/j.pacfin.2025.102797
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    More about this item

    Keywords

    Public debt; Cost of debt; Private versus private issuer; Regulatory environment; Country-level institutions;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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