Investor Base and Corporate Borrowing: Evidence from International Bonds

42 Pages Posted: 12 Mar 2010 Last revised: 15 Dec 2013

See all articles by Massimo Massa

Massimo Massa

INSEAD - Finance

Alminas Zaldokas

Hong Kong University of Science & Technology (HKUST) - Department of Finance

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Date Written: May 16, 2012

Abstract

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.

Keywords: international bond issues, international bondownership, investor recognition hypothesis

JEL Classification: G15, G32, G33

Suggested Citation

Massa, Massimo and Zaldokas, Alminas, Investor Base and Corporate Borrowing: Evidence from International Bonds (May 16, 2012). Journal of International Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1568807 or http://dx.doi.org/10.2139/ssrn.1568807

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
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Alminas Zaldokas (Contact Author)

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong

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