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Global Dollar Credit and Carry Trades: A Firm-Level Analysis

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  • Valentina Bruno
  • Hyun Song Shin

Abstract

We conduct a firm-level analysis of borrowing in US dollars by nonfinancial corporates from outside the United States. We find that emerging market firms with already high cash holdings are more likely to issue US dollar-denominated bonds, especially during periods when the dollar carry trade is more favorable. The proceeds of the dollar bond issuance add to the firm’s cash holdings more than other sources of funds. The evidence points to financial decisions that resemble carry trades, rather than to precautionary borrowing in anticipation of future financing needs.Received November 30, 2015; editorial decision July 20, 2016 by Editor Itay Goldstein

Suggested Citation

  • Valentina Bruno & Hyun Song Shin, 2017. "Global Dollar Credit and Carry Trades: A Firm-Level Analysis," Review of Financial Studies, Society for Financial Studies, vol. 30(3), pages 703-749.
  • Handle: RePEc:oup:rfinst:v:30:y:2017:i:3:p:703-749.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhw099
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    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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