Search for Yield in Large International Corporate Bonds : Investor Behavior and Firm Responses
Emerging market corporations have significantly increased their borrowing in international markets since 2008. This paper shows that this increase was driven by large-denomination bond issuances, most of them with face value of US$500 million. Larg...
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2019
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| Online Access: | http://documents.worldbank.org/curated/en/521151560780812693/Search-for-Yield-in-Large-International-Corporate-Bonds-Investor-Behavior-and-Firm-Responses http://hdl.handle.net/10986/31903 |
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okr-10986-319032022-08-01T00:25:14Z Search for Yield in Large International Corporate Bonds : Investor Behavior and Firm Responses Calomiris, Charles W. Larrain, Mauricio Schmukler, Sergio L. Williams, Tomas BOND ISSUE CORPORATE FINANCE BENCHMARK INDEX EMERGING MARKET ECONOMIES INSTITUTIONAL INVESTOR CORPORATE BONDS CORPORATE DEBT Emerging market corporations have significantly increased their borrowing in international markets since 2008. This paper shows that this increase was driven by large-denomination bond issuances, most of them with face value of US$500 million. Large issuances are eligible for inclusion in international market indexes, which attract institutional investors. Emerging market firms were able to cut their cost of funds by roughly 100 basis points by issuing large-denomination bonds. Firms face a tradeoff: issue large, index-eligible bonds to borrow at a lower cost (about 100 basis points) but pay the expense of hoarding cash. Because of the "size yield discount," many companies issued index-eligible bonds, increasing their cash holdings. The willingness to issue large bonds and hoard cash was greater for firms in countries with high carry trade opportunities. These post-2008 behaviors reflected a search for yield by institutional investors into higher-risk securities and are not apparent in developed economies. 2019-06-19T16:12:02Z 2019-06-19T16:12:02Z 2019-06 Book http://documents.worldbank.org/curated/en/521151560780812693/Search-for-Yield-in-Large-International-Corporate-Bonds-Investor-Behavior-and-Firm-Responses http://hdl.handle.net/10986/31903 English Policy Research Working Paper;No. 8890 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper |
| repository_type |
Digital Repository |
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Foreign Institution |
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Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
BOND ISSUE CORPORATE FINANCE BENCHMARK INDEX EMERGING MARKET ECONOMIES INSTITUTIONAL INVESTOR CORPORATE BONDS CORPORATE DEBT |
| spellingShingle |
BOND ISSUE CORPORATE FINANCE BENCHMARK INDEX EMERGING MARKET ECONOMIES INSTITUTIONAL INVESTOR CORPORATE BONDS CORPORATE DEBT Calomiris, Charles W. Larrain, Mauricio Schmukler, Sergio L. Williams, Tomas Search for Yield in Large International Corporate Bonds : Investor Behavior and Firm Responses |
| relation |
Policy Research Working Paper;No. 8890 |
| description |
Emerging market corporations have
significantly increased their borrowing in international
markets since 2008. This paper shows that this increase was
driven by large-denomination bond issuances, most of them
with face value of US$500 million. Large issuances are
eligible for inclusion in international market indexes,
which attract institutional investors. Emerging market firms
were able to cut their cost of funds by roughly 100 basis
points by issuing large-denomination bonds. Firms face a
tradeoff: issue large, index-eligible bonds to borrow at a
lower cost (about 100 basis points) but pay the expense of
hoarding cash. Because of the "size yield
discount," many companies issued index-eligible bonds,
increasing their cash holdings. The willingness to issue
large bonds and hoard cash was greater for firms in
countries with high carry trade opportunities. These
post-2008 behaviors reflected a search for yield by
institutional investors into higher-risk securities and are
not apparent in developed economies. |
| format |
Book |
| author |
Calomiris, Charles W. Larrain, Mauricio Schmukler, Sergio L. Williams, Tomas |
| author_facet |
Calomiris, Charles W. Larrain, Mauricio Schmukler, Sergio L. Williams, Tomas |
| author_sort |
Calomiris, Charles W. |
| title |
Search for Yield in Large International Corporate Bonds : Investor Behavior and Firm Responses |
| title_short |
Search for Yield in Large International Corporate Bonds : Investor Behavior and Firm Responses |
| title_full |
Search for Yield in Large International Corporate Bonds : Investor Behavior and Firm Responses |
| title_fullStr |
Search for Yield in Large International Corporate Bonds : Investor Behavior and Firm Responses |
| title_full_unstemmed |
Search for Yield in Large International Corporate Bonds : Investor Behavior and Firm Responses |
| title_sort |
search for yield in large international corporate bonds : investor behavior and firm responses |
| publisher |
World Bank, Washington, DC |
| publishDate |
2019 |
| url |
http://documents.worldbank.org/curated/en/521151560780812693/Search-for-Yield-in-Large-International-Corporate-Bonds-Investor-Behavior-and-Firm-Responses http://hdl.handle.net/10986/31903 |
| _version_ |
1764475330643361792 |