Global Sales, International Currencies and the Currency Denomination of Debt

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 debt issuance: 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. International currency bias is more pronounced for bonds, consistent with the skew of global investors towards bonds denominated in US dollars and euros. Finally, we find that the euro bias in debt issuance has strengthened in the decade following the global financial crisis.

Keywords: International bonds, exchange rates

JEL Classification: F31, F34, G12