Maturity Diversification: the use of Foreign and Domestic Bonds

Abstract

Raising capital to support the execution of an organization's strategy is one of the most important responsibilities of financial managers. In our analysis we examine the characteristics of issued debt, specifically the maturity and market of issuance. Our empirical analysis finds that firms issue bonds to diversify their bond maturity profile using both foreign and domestic markets. Although firms primarily raise debt using their domestic markets, they use both foreign and domestic markets especially at the short and long maturities. Beyond diversifying their maturity portfolio, borrowing decisions are influenced by factors such as asset maturity, credit worthiness, and transparency.