Political Ties and Capital Raising in Global Markets: Evidence from Yankee Bonds

58 Pages Posted: 27 Mar 2019 Last revised: 3 Sep 2019

See all articles by Gene Ambrocio

Gene Ambrocio

Bank of Finland

Xian Gu

Durham University Business School

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Date Written: September 1, 2019

Abstract

This paper examines whether state-to-state political ties help to obtain better terms when raising capital in global capital markets. Focusing on publicly issued Yankee bonds, we observe that firms from countries with close political ties to the US have been successful in reducing borrowing costs. Specifically, a one-standard-deviation improvement in such ties can lead to a 5 to 14 percent reduction in at-issue yield spreads. Such an association is more pronounced for firms located in countries that are highly indebted, in government-related industries, and during home-country recessions. Our study sheds lights on the importance of country-level political relationships in international fund-raising.

Keywords: Yankee bonds; Political ties; Bond yield spread

JEL Classification: G15; G30; P16

Suggested Citation

Ambrocio, Gene and Gu, Xian and Hasan, Iftekhar, Political Ties and Capital Raising in Global Markets: Evidence from Yankee Bonds (September 1, 2019). Available at SSRN: https://ssrn.com/abstract=3352676 or http://dx.doi.org/10.2139/ssrn.3352676

Gene Ambrocio

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Xian Gu

Durham University Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

Iftekhar Hasan (Contact Author)

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

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