The Costs, Wealth Effects, and Determinants of International Capital Raising: Evidence from Public Yankee Bonds

Darius P. Miller and John J. Puthenpurackal

No 445, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

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.

Keywords: Banking and Finance; Yankee bonds; International Capital Raising (search for similar items in EconPapers)
JEL-codes: F3 (search for similar items in EconPapers)
Pages: pages
Date: 2001-10-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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