Global Sales, International Currencies and the Currency Denomination of Debt

84 Pages Posted: 22 Mar 2021 Last revised: 21 May 2024

See all articles by Ric Colacito

Ric Colacito

University of North Carolina Kenan-Flagler Business School; NBER

Yan Qian

University of North Carolina at Chapel Hill

Andreas Stathopoulos

University of North Carolina (UNC) at Chapel Hill

Date Written: April 23, 2024

Abstract

We document that the currency denomination of the debt of large firms in developed countries
is strongly associated with the geographical distribution of their sales. Furthermore, those firms
exhibit significant home currency bias and international currency bias in borrowing: controlling
for the geography of sales, they borrow more in their home currency and the two most traded
currencies, the US dollar and the euro. We also show that the firms’ debt currency denomination
choices are associated with export invoicing currency patterns in a way consistent with a currency
hedging mechanism. In particular, firms domiciled in countries that invoice a larger share of
their exports in either their home currency or in a vehicle currency exhibit a weaker connection
between the currency denomination of their debt and the geography of their sales. Moreover,
firms in countries that invoice more of their exports in an international currency are characterized
by stronger international currency bias in debt issuance.

Keywords: International bonds, exchange rates

JEL Classification: F31, F34, G12

Suggested Citation

Colacito, Riccardo and Qian, Yan and Stathopoulos, Andreas, Global Sales, International Currencies and the Currency Denomination of Debt (April 23, 2024). Available at SSRN: https://ssrn.com/abstract=3762278 or http://dx.doi.org/10.2139/ssrn.3762278

Riccardo Colacito (Contact Author)

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States

HOME PAGE: http://drric.web.unc.edu/

NBER ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yan Qian

University of North Carolina at Chapel Hill ( email )

Chapel Hill, NC
United States

Andreas Stathopoulos

University of North Carolina (UNC) at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
509
Abstract Views
1,803
Rank
105,377
PlumX Metrics