Eurodollar bond issue by American corporations

This research investigates the reasons that U.S.A. companies issue public debt in straight fix rate Eurodollar bonds rather than issue public debt in straight fix rate domestic bonds; analyze the factors that affect the placement of the eurodollar debt in the capital structure of the companies, and the factors that affect the at issue price of Eurodollar bonds. Data for 128 companies with 887 Eurodollar bond issue and 720 domestic companies issuing 7521 domestic bonds for the period 1985–2000 were used to test the different hypotheses.; The results for the choosing of debt show that firms with higher growth opportunities, higher credit rating, higher research and development expenditures, and higher international activity are more likely to issue Eurodollar bonds. Stocks of companies that issue Eurodollar bonds present a negative cumulative abnormal return on a two days window, just like domestic bonds issue.; The next section analyzes the debt placement for Eurodollar bonds. The results show that size of issue is negatively related to the proportion of Eurodollar debt, there is a positive relation of the intangibles assets with the proportion of Eurodollar debt, the retail foreign investor take into account the change with respect to their own currency and is willing to accept lower interest if there is a dollar revaluation. The foreign income does not affect the proportion of Eurodollar debt and the more profitable companies have lower proportion of Eurodollar debt. The results suggest that there is a target proportion of Eurodollar debt.; The factors that determine the bond pricing were analyzed. On average, the market requires a higher spread for buying larger issues. The increases in the maturity of the bonds increase the yield on average as was expected for both domestic and Eurodollar bonds. The market does not see on average any difference between companies in regulated and unregulated industries. Eurodollar bonds are sold at higher prices than domestic bonds. The Eurodollar bond yield, from the regression, is on average 66.2 points lower than similar domestic bonds issued by companies that do not issue Eurodollar bonds. The results suggest forward-looking financial markets.