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Where Do Firms Issue Debt? An Empirical Analysis of Issuer Location and Regulatory Competition in Europe

43 Pages Posted: 10 Oct 2010  

Horst Eidenmueller

University of Oxford; European Corporate Governance Institute (ECGI)

Andreas Engert

University of Mannheim

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics; Max Planck Institute for Innovation and Competition; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: September 1, 2010

Abstract

In this article, we study the choice of issuer location and regulatory competition in the European corporate debt market. We find that, in absolute terms, Germany has by far the highest outflow of debt issues, while the Netherlands, the UK, Luxembourg and Ireland see the most inflows (in that order). We use a panel gravity model to investigate country specific factors attracting foreign subsidiaries as issuer. The data clearly support the prediction that the locational choice is positively influenced by a low withholding tax rate. There is also some evidence that corporate tax rates play a role. We do not find support for creditor protection rules in bankruptcy as a driver of cross-border debt securities issues. Hence, countries who wish to attract issuers are well-advised to reduce their withholding tax rates – creditor rights seem not to matter.

Keywords: debt securities, corporate bonds, external finance, regulatory competition, tax competition, legal arbitrage, multinational corporations, subsidiaries

JEL Classification: K12, K22, G18, G33

Suggested Citation

Eidenmueller, Horst and Engert, Andreas and Hornuf, Lars, Where Do Firms Issue Debt? An Empirical Analysis of Issuer Location and Regulatory Competition in Europe (September 1, 2010). ECGI - Finance Working Paper No. 292/2010. Available at SSRN: https://ssrn.com/abstract=1678442 or http://dx.doi.org/10.2139/ssrn.1678442

Horst G. M. Eidenmueller

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Andreas Engert (Contact Author)

University of Mannheim ( email )

Schloss Westflügel
68131 Mannheim, 68131
Germany

HOME PAGE: http://engert.info

Lars Hornuf

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

University of Bremen - Faculty of Business Studies and Economics ( email )

Bremen, D-28359
Germany
+49 89 20348619 (Phone)

HOME PAGE: http://www.hornuf.com

Max Planck Institute for Innovation and Competition

Marstallplatz 1
Munich, 80539
Germany

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