Abstract
In recent years, firms in several industrialized economies have globalized. In this paper, it is shown that the economic exposure of such non-financial firms plays an important role in their long-term debt financing choice. When firms face positive economic exposure, eurocurrency debt denominated in foreign currency dominates foreign debt as well as domestic debt. However, when firms face negative economic exposure, foreign debt dominates other forms of debt financing as the value-maximizing choice for the shareholders of the firm. If firms are not exposed, domestic debt, foreign-currency debt, and eurocurrency debt are equivalent financing alternatives, in the absence of bankruptcy costs.
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