Why Do Firms Raise Foreign Currency Denominated Debt?
31 Pages Posted: 11 Feb 1997
Date Written: February 1997
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: Suggested Citation