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Foreign Currency Denominated Debt: An Empirical Examination

Author

Listed:
  • Simi Kedia

    (Harvard University)

  • Abon Mozumdar

    (Virginia Tech)

Abstract

We examine the determinants of debt issuance in 10 major currencies by large U.S. firms. Using the fraction of foreign subsidiaries and tests exploiting the disaggregated nature of our data, we find strong evidence that firms issue foreign currency debt to hedge their exposure both at the aggregate and the individual currency levels. We also find some evidence that firms choose currencies in which information asymmetry between domestic and foreign investors is low. We find no evidence that tax arbitrage, liquidity of underlying debt markets, or legal regimes influence the decision to issue debt in foreign currency.

Suggested Citation

  • 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.
  • Handle: RePEc:ucp:jnlbus:v:76:y:2003:i:4:p:521-546
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