Geopolitical risk and offshore corporate bond issuance in local currency

Qi Zhang, Ling Wang, Xiaoxuan Sun and Ning Lin

Finance Research Letters, 2025, vol. 82, issue C

Abstract: This study investigates the impact of geopolitical risk on the currency denomination of offshore corporate bonds. By analyzing a sample of listed firms across 27 economies from 2010 to 2023, we find that elevated geopolitical risk is associated with reduced offshore corporate bond issuance in local currency. This association is weaker in bonds with shorter maturity or higher credit rating, in firms with higher solvency, as well as in economies with higher income, greater social and economic development, and deeper derivatives markets. Meanwhile, tightened macro-prudential policies and monetary policy transparency help to mitigate GPR’s negative effect. Besides, heightened geopolitical risk leads to aggravated exchange rate volatility, rising risk premium, and increased corporate operational risk, thereby reducing offshore issuance in local currency.

Keywords: Local currency denomination; Corporate bond financing; Offshore market; Geopolitical risks (search for similar items in EconPapers)
JEL-codes: E43 F34 G15 G32 O16 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325008153

DOI: 10.1016/j.frl.2025.107556

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