Corporate Debt Structure with Home and International Currency Bias

26 Pages Posted: 30 Nov 2023

See all articles by Matteo Maggiori

Matteo Maggiori

Stanford Graduate School of Business

Brent Neiman

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Jesse Schreger

Columbia University - Columbia Business School, Economics; National Bureau of Economic Research (NBER)

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Date Written: November 18, 2023

Abstract

We explore the consequences of global capital market segmentation by currency for the optimal currency composition of borrowing by firms. Global
bond portfolios are driven by the currency of denomination of assets as investors prefer to lend in their home currency or the international currency, the US Dollar. Larger and more productive firms select into foreign currency issuance. International segmentation results in a quantity-dimension of the exorbitant privilege whereby US firms that only issue in the domestic currency benefit from being able to more easily borrow from global investors.

Keywords: Capital Flows, Exorbitant Privilege, Home Currency Bias, Reserve Currencies

JEL Classification: E42, E44, F3, F55, G11, G15, G23, G28

Suggested Citation

Maggiori, Matteo and Neiman, Brent and Schreger, Jesse, Corporate Debt Structure with Home and International Currency Bias (November 18, 2023). Available at SSRN: https://ssrn.com/abstract=4637137 or http://dx.doi.org/10.2139/ssrn.4637137

Matteo Maggiori

Stanford Graduate School of Business ( email )

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Brent Neiman

University of Chicago - Booth School of Business ( email )

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HOME PAGE: http://faculty.chicagobooth.edu/brent.neiman/index.html

National Bureau of Economic Research (NBER) ( email )

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Jesse Schreger (Contact Author)

Columbia University - Columbia Business School, Economics ( email )

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National Bureau of Economic Research (NBER) ( email )

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