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Search for Yield in Large International Corporate Bonds : Investor Behavior and Firm Responses / Charles W Calomiris.
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Calomiris, Charles W.
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Benchmark Index.
- Bond Issue.
- Capital Markets and Capital Flows.
- Corporate Bonds.
- Corporate Debt.
- Corporate Finance.
- Debt Markets.
- Emerging Market Economies.
- Emerging Markets.
- Finance and Financial Sector Development.
- Institutional Investor.
- Mutual Funds.
- Private Sector Development.
- Private Sector Economics.
- Local Subjects:
- Benchmark Index.
- Bond Issue.
- Capital Markets and Capital Flows.
- Corporate Bonds.
- Corporate Debt.
- Corporate Finance.
- Debt Markets.
- Emerging Market Economies.
- Emerging Markets.
- Finance and Financial Sector Development.
- Institutional Investor.
- Mutual Funds.
- Private Sector Development.
- Private Sector Economics.
- Physical Description:
- 1 online resource (74 pages)
- Other Title:
- Search for Yield in Large International Corporate Bonds
- Place of Publication:
- Washington, D.C. : The World Bank, 2019.
- System Details:
- data file
- Summary:
- 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 USD 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.
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