The Costs, Wealth Effects and Determinants of International Capital Raising: Evidence from Public Yankee Bonds
Publication Date
2-18-2000
Abstract
This paper examines the costs, wealth effects, and determinants of international capital raising for a sample of 260 public debt issues made by non-U.S. firms in the U.S. (Yankee) market. We find that investors demand economically significant premiums on bonds issued by firms that are located in countries that do not protect investors' rights and do not have a prior history of on-going disclosure. The results provide support for the literature that suggests better legal protections and more detailed information disclosure increases the price investors will pay for financial assets. We also find that the average stock price reaction to Yankee bond offerings is significantly positive and that abnormal returns are largest for first-time Yankee bond issuers. In addition, we show that foreign firms tend to issue in the Yankee market when the relative interest cost is low, indicating that potential differences in borrowing costs influence where firms choose to sell bonds.
Document Type
Article
Keywords
Yankee bonds, International Capital Raising
Disciplines
Finance
DOI
10.2139/ssrn.199108
Source
SMU Cox: Finance (Topic)
Language
English
