publication . Article . 2010

do firms believe in interest rate parity

Matthew R. McBrady; Sandra Mortal; Michael J. Schill;
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  • Published: 06 Mar 2010 Journal: SSRN Electronic Journal (eissn: 1556-5068, Copyright policy)
  • Publisher: Elsevier BV
Abstract
Using a broad sample of international corporate bond offerings, we provide evidence that corporate borrowers make opportunistic currency choices, in that they denominate the currency of their bonds in a manner that is inconsistent with a belief in either covered or uncovered interest rate parity. Using firm-level tests, we identify a number of characteristics of firms that engage in opportunistic behavior. We observe that large issuers located in developed markets with investment-grade ratings and low cash flow characterize those firms that are responsive to covered borrowing rate differences across currencies. Corporate responsiveness to uncovered borrowing rat...
Subjects
free text keywords: Corporate bond, Finance, business.industry, business, Parity (mathematics), Economics, Bond, Interest rate parity, Currency, Cash flow, International Fisher effect, Financial economics, Issuer
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publication . Article . 2010

do firms believe in interest rate parity

Matthew R. McBrady; Sandra Mortal; Michael J. Schill;