Eurobond Issue And Firm Value

Abstract

This study explores differences between US-bonds and Eurobonds and analyzes the effect of some Eurobond characteristics on firm value. First, it attempts to determine if investors view U.S. and Eurobonds similarly, especially after the change in tax laws that exempted U.S.-bond holders from paying 30 percent withholding taxes. Then, the paper analyzes the effect of some of the Eurobond issue characteristics such as issue size, issue frequency, yield spread, and maturity term on firm value. The results show that Eurobonds provide investors an alternative for portfolio diversification, and as a result, the bond market remained segmented. Also, the increase in firm value was statistically significant for the firm’s first Eurobond issue. The increase in firm value for the subsequent Eurobond issues was not statistically significant.