Global Dollar Credit and Carry Trades: A Firm-Level Analysis

Review of Financial Studies, Forthcoming

65 Pages Posted: 4 Jun 2015 Last revised: 8 Aug 2016

See all articles by Valentina Bruno

Valentina Bruno

American University - Department of Finance and Real Estate; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Hyun Song Shin

Bank for International Settlements (BIS)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2016

Abstract

We conduct a firm-level analysis of borrowing in US dollars by non-financial corporates from outside the United States. The dataset combines bond issuance data with firm-level financial information. We find that firms with already high cash holdings are more likely to issue US dollar-denominated bonds, and that the proceeds of the bond issue add to cash holdings. The tendency to borrow in dollars is more pronounced during periods when the dollar carry trade is more favourable and is prevalent for emerging market firms. The use of bond proceeds by emerging market firms points to financial decisions that bear an outward resemblance to carry trades, rather than precautionary borrowing in anticipation of future financing needs.

Keywords: Emerging markets, bond issuance, surrogate intermediaries, US dollar credit

JEL Classification: F32, G15, G30

Suggested Citation

Bruno, Valentina Giulia and Shin, Hyun Song, Global Dollar Credit and Carry Trades: A Firm-Level Analysis (August 2016). Review of Financial Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2614074 or http://dx.doi.org/10.2139/ssrn.2614074

Valentina Giulia Bruno (Contact Author)

American University - Department of Finance and Real Estate ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States

HOME PAGE: http://www.american.edu/kogod/faculty/bruno.cfm

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Hyun Song Shin

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://www.bis.org/author/hyun_song_shin.htm

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