Abstract

http://ssrn.com/abstract=672624
 
 

References (28)



 
 

Citations (2)



 


 



Do Firms Believe in Interest Rate Parity?


Matthew R. McBrady


University of Virginia - Darden School of Business

Sandra Mortal


University of Memphis

Michael J. Schill


University of Virginia – Darden Graduate School of Business Administration

October 10, 2007

AFA 2006 Boston Meetings Paper

Abstract:     
We find that firms alter the currency composition of their international bond issues to respond to differences in borrowing rates across currencies. For a broad sample of international corporate bonds denominated in six major currencies, we find strong and consistent evidence that firms respond to apparent departures from both covered and uncovered interest parity in their financing decisions. Emerging market and non-investment grade issuers are less likely to respond to differences in covered yields consistent with their limited access to currency swap markets. Overall, the gains that firms achieve are economically significant but consistent with well-functioning markets.

Number of Pages in PDF File: 33

Keywords: Interest rate parity, international bonds, currency timing, opportunistic financing

JEL Classification: G32, F31

working papers series


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Date posted: February 24, 2005 ; Last revised: June 9, 2011

Suggested Citation

McBrady, Matthew R. and Mortal, Sandra and Schill, Michael J., Do Firms Believe in Interest Rate Parity? (October 10, 2007). AFA 2006 Boston Meetings Paper. Available at SSRN: http://ssrn.com/abstract=672624 or http://dx.doi.org/10.2139/ssrn.672624

Contact Information

Matthew R. McBrady
University of Virginia (UVA) - Darden School of Business ( email )
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
HOME PAGE: http://www.darden.virginia.edu/faculty/mcbrady.htm
Sandra Mortal
University of Memphis ( email )
Memphis, TN 38152
United States
(901) 678-4327 (Phone)
(901) 678-0839 (Fax)
HOME PAGE: http://https://umdrive.memphis.edu/scmortal/public/
Michael J. Schill (Contact Author)
University of Virginia – Darden Graduate School of Business Administration ( email )
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4071 (Phone)
434-243-7676 (Fax)
HOME PAGE: http://www.darden.virginia.edu/faculty/schill.htm
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