Why Do Firms Raise Foreign Currency Denominated Debt?

31 Pages Posted: 11 Feb 1997

See all articles by Matti Keloharju

Matti Keloharju

Aalto University - School of Business; Research Institute of Industrial Economics (IFN); Centre for Economic Policy Research (CEPR)

Mervi Niskanen

University of Eastern Finland

Date Written: February 1997

Abstract

This study examines the determinants of the decision to raise foreign currency denominated debt by taking advantage of a unique and comprehensive sample of private and public debt raised by 44 Finnish corporations. The results suggest that small firms borrow from domestic banks and insurance companies and in the domestic currency, while large firms rely on foreign banks and foreign currencies. Moreover, the results are consistent with the argument that hedging is an important determinant of the currency-of-denomination decision: firms in which exports constitute a significant fraction of turnover are most likely to raise currency debt.

JEL Classification: G20

Suggested Citation

Keloharju, Matti and Niskanen, Mervi, Why Do Firms Raise Foreign Currency Denominated Debt? (February 1997). Available at SSRN: https://ssrn.com/abstract=2112 or http://dx.doi.org/10.2139/ssrn.2112

Matti Keloharju (Contact Author)

Aalto University - School of Business ( email )

P.O. Box 21210
AALTO, FI-00076
Finland
+358 40 353 8043 (Phone)

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Mervi Niskanen

University of Eastern Finland ( email )

PL 1627
Kuopio, 70211
Finland

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