Choice of Currency in Bond Issuance and the International Role of Currencies

40 Pages Posted: 2 Oct 2007

See all articles by Nikolaus Siegfried

Nikolaus Siegfried

European Central Bank

Emilia Simeonova

Johns Hopkins University - Carey Business School

Cristina Vespro

ECARES, Université Libre de Bruxelles; European Corporate Governance Institute (ECGI)

Date Written: September 2007

Abstract

This paper investigates bond issuance of non-financial corporations in advanced economies during the period 1999-2003, attempting to understand motives for issuing in foreign currency, and determinants for the choice of currency. We consider the following influences on the currency choice when issuing foreign currency denominated debt: the microeconomic characteristics of the firm, the macroeconomic institutional environment and the financial particularities of the bond issue. We find that in addition to cost minimisation, hedging motives and the desire to establish an investor base influences the choice of currency. At the same time, market conventions and regulation also affect the choice.

Keywords: Bond issuance, Foreign currency denominated debt, Panel logit, nested logit, conditional logit

JEL Classification: C25, E44, F23, G32

Suggested Citation

Siegfried, Nikolaus and Simeonova, Emilia and Vespro, Cristina, Choice of Currency in Bond Issuance and the International Role of Currencies (September 2007). ECB Working Paper No. 814, Available at SSRN: https://ssrn.com/abstract=1015262

Nikolaus Siegfried (Contact Author)

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Emilia Simeonova

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

Cristina Vespro

ECARES, Université Libre de Bruxelles ( email )

Ave. Franklin D Roosevelt, 50 - C.P. 114
Brussels, B-1050
Belgium

European Corporate Governance Institute (ECGI)

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

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