Seminar: Alminas Zaldokas, INSEAD.

 Title: Investor Base and Corporate Borrowing Policy: Evidence from International Bonds.

We study international issuance of bonds by US firms in the period from 1998 to 2006. We argue that US firms use international issuances as a way of accessing capital of the investors that are less exposed to US credit risk. Firms learn about their ability to issue internationally and target international investors if they have prior international bond holding in their domestic bonds. We show that the offering yield on international bonds is lower for these firms. We also show that the effect that international investors are willing to pay higher prices than domestic investors is mostly concentrated in better quality bonds. The ability to finance internationally has real effects on the operations of the firm. The fraction of international bondownership is negatively related to the probability of default and the degree of financial constraint of the firm. These results highlight that the benefits of international capital markets also exist for the firms that are located in countries with highly developed capital markets already.