Political ties and raising capital in global markets: Evidence from Yankee bonds
Ambrocio, Gene; Gu, Xian; Hasan, Iftekhar (28.05.2022)
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JulkaisusarjaJournal of Corporate Finance
NumeroJune ; 2022
Julkaisun pysyvä osoite onhttps://urn.fi/URN:NBN:fi:bof-202109131514
This paper examines whether state-to-state political ties help firms obtain better terms when raising funds in global capital markets. Focusing on the Yankee bonds market, we find that issuances by firms from countries with close political ties with the US feature lower yield spreads, higher issuance amounts, and longer maturities. Such an association is more pronounced for firms located in low income and highly indebted countries as well as firms in government-related industries, first-time issuers, and relatively smaller firms. Our study provides evidence supporting the notion that country-level political relationship is an important factor when raising capital in international markets.