Abstract
This paper introduces the availability of domestic and foreign markets into the corporate heterogeneous currency financing model and concludes that arbitrage motivation, limited financing in the domestic market, and easy access to foreign markets encourages firms to issue U.S. dollar bonds. Using a comprehensive database covering bond issuances by Chinese firms in domestic and offshore markets from 2011 to 2017, we find that the empirical results support the above conclusion and show that firms with higher leverage rates tend to issue U.S. dollar bonds, while firms with more exposure to foreign exchange risk or state-owned enterprises do not tend to issue U.S. dollar bonds. Such results provide important implications to both financial institutions and regulatory agencies.
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