NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Tomas Williams

George Washington University
Department of Economics
2115 G Street, NW
Room 340
Washington, DC 20052

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Institutional Affiliation: George Washington University

NBER Working Papers and Publications

June 2019Search for Yield in Large International Corporate Bonds: Investor Behavior and Firm Responses
with Charles W. Calomiris, Mauricio Larrain, Sergio L. Schmukler: w25979
Emerging market corporations have significantly increased their borrowing in international markets since 2008. We show that this increase was driven by large-denomination bond issuances, most of them with face value of exactly US$500 million. Large issuances are eligible for inclusion in important international market indexes. These bonds appeal to institutional investors because they are more liquid and facilitate targeting market benchmarks. We find that the rewards of issuing index-eligible bonds rose drastically after 2008. Emerging market firms were able to cut their cost of funds by roughly 100 basis points by issuing bonds with a face value equal to or greater than US$500 million relative to smaller bonds. Firms contemplating whether to take advantage of this cost saving face a trad...
 
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