ترکیب ارز اوراق قرضه بین المللی: اثر EMU

We analyze the impact that the launch of the EMU had on the currency denomination of private international bond issues in 1990–2006 using micro-level data. Our stylized model predicts that the introduction of the euro would lead to an increase in the share of euro-denominated debt and a decline in the share of dollar-denominated debt issued by firms located in countries outside both the United States and the euro area. Moreover, our model predicts that the euro effect would be particularly pronounced for nonfinancial firms. Our empirical results are consistent with these predictions. In addition, we find that among nonfinancial firms, the impact on new issuers is larger than on seasoned issuers. Extending the model to allow for differences in issuance volumes across future monetary union countries prior to integration, we also predict larger increases in euro-denominated issuance among firms from smaller monetary union countries. We confirm this prediction for international bond issues by euro-area firms.

Firms issuing bonds in international bond markets face a choice of a currency in which to denominate their issues. Transaction costs may differ across currencies due to differences in the size of markets for bonds denominated in different currencies combined with scale economies that exist because larger markets enjoy greater analyst coverage, hedging opportunities, and a larger set of potential creditors. On their own, these scale economies would tend to push firms issuing in foreign currencies towards the dominant international currency, the U.S. dollar. Individual firms, however, may have idiosyncratic advantages of issuing in certain currencies. For example, issuing in the currency that matches a firm's revenue stream may avoid currency mismatch problems. The choice of invoice currency in international goods transactions has been studied extensively. Early studies (Swoboda, 1968) emphasized choosing a currency to reduce transactions costs, while more recent studies have stressed minimizing exposure to macroeconomic volatility (Giovannini, 1988) and network effects (Rey, 2001 and Goldberg and Tille, 2008). Similar concerns should arise in the currency-denomination decision for bond issuance. For example, issuing bonds in U.S. dollars versus the euro has different implications for the dynamics of the liability side of a firm's balance sheet because of the dollar-euro exchange rate fluctuations. In this paper, we investigate the determinants of foreign firms' decisions regarding currency denomination of bonds by examining the impact the launch of the euro had on such decisions, using theoretical arguments and empirical analysis of micro-level data. The introduction of the euro has been shown to lead to a reduction in the cost of bond issuance in euros relative to the cost of bond issuance in pre-monetary union national currencies (Santos and Tsatsaronis, 2006 and Melnik and Nissim, 2006). Similarly, Coeurdacier and Martin (2009) find that the advent of the euro has resulted in a 14% to 17% reduction in transactions costs. These reductions in the cost of issuance in euros, holding all else equal, should make issuing euro-denominated debt more attractive to foreign firms. Our micro-level data set allows us to differentiate between the firms that switched to euro issuance from issuance in other currencies from firms that already issued debt denominated in currencies of future EMU members and increased the share of that debt in their overall bond issuance after the introduction of the euro. We refer to the first effect of the euro introduction as occurring on the “extensive” margin and the second as occurring on the “intensive” margin. Of course, there is substantial evidence that the launch of the EMU also coincided with increased financial market integration in European stock and bond markets (Kim et al., 2006). Kalemli-Ozcan et al. (2010) find that the elimination of currency risk and legislative-regulatory convergence played a role in the financial integration of the euro area. However, we cannot follow issuance decisions by individual European firms because we do not have complete data on domestic bond issuance at the firm level. For that reason, we concentrate our study on the issuance decisions by firms from countries outside both the euro area and the United States, determining how the launch of the euro affected their propensity to either issue in euros in greater volume or to switch from dollar-denominated to euro-denominated issuance. To understand the impact of the launch of the euro on currency denomination of international bonds, we construct a model containing two large areas: a financial center that can be interpreted as the United States and a collection of identical countries that form a monetary union and can be interpreted as the euro area. Firms in these areas have heterogeneous propensities to issue debt denominated in the foreign currency. The main tension of the model is between the transaction costs associated with issuing in a given currency, which we assume to be decreasing with market size due to scale economies, and currency risk premia or other costs specific to issuing in foreign currency. We model the advent of the euro as a switch from many individual currency markets to a single currency market. Our model predicts an increase in the share of euro issuance and a decline in the share of dollar issuance for firms in both the monetary union and in the large financial center. As discussed above, we cannot take these predictions directly to the data as firm-level data on issuance in domestic currencies are lacking a complete set of domestically placed issues. We therefore extend our model to consider its predictions for currency-of-issuance decisions of firms located in small outsider countries, i.e., countries other than the U.S. or the euro-area member countries. Our model predicts that the composition of foreign-currency issues by firms located in the outsider countries will also be tilted by the global changes in issuance volumes towards issuing debt in euros and away from issuing debt in dollars. Moreover, our model predicts that the impact of the launch of the union will be greater for firms that are more sensitive to changes in transaction costs, as we would expect to be the case for nonfinancial firms. We take these last predictions to a large data set of individual bond issues of firms from countries that are outside the United States or the euro area. We do this to make sure that our results are not driven by the omission of domestic bond markets, for which our data source is incomplete (Burger and Warnock, 2006). Our data come from Dealogic DCM Analytics data base, a.k.a Bondware, and include all bonds issued in international bond markets by private firms with nationality of operations in one of nine countries active in international bond markets between 1990 and 2006. 1 To our knowledge, our paper is the first to bring a large micro-level data set to bear on the question of currency denomination of bonds. 2 The use of micro-level data allows us to control for the currency of each bond issue, its size, maturity, governing law, and the issuer's nationality of operations. The latter is especially important because it allows us to control for country-specific factors and because, as Warnock and Cleaver (2003) point out, analysis based on aggregate data is subject to a bias due to bond issuance through offshore financial centers. Finally, aggregate data are reported as either debt outstanding or issuance net of repayments, which are noisy measures of issuer's behavior, unlike the issuance data. We first examine the impact of the advent of the euro on the currency denomination of international bond issues in a multinomial logit specification, separately for financial and nonfinancial firms. Firms choose their currency of issue between U.S. dollars, euros, or another currency. Our results are consistent with the predictions of our model in that they show an economically and statistically significant increase in the probability of issuing in euros after the advent of the EMU for nonfinancial firms, but not for financial firms. Our point estimates indicate that, other things being equal, the probability that a nonfinancial firm's international bond issue was denominated in euros was 17 percentage points higher after the advent of the EMU, while the probability that it was denominated in U.S. dollars was 13 percentage points lower. This indicates that most of the increase in euro-denominated issuance was at the expense of U.S. dollar issuance. We find no significant impact of the EMU on the currency denomination of bonds issued by financial firms. We next split our sample into seasoned and unseasoned issuers, to allow for heterogeneity in the EMU effect across these two groups. Seasoned firms may have paid fixed costs associated with issuing in a given currency for the first time, or may have established relationships with underwriters or important customers in a certain currency bond market. 3 Unseasoned firms, on the other hand, do not have a connection to a specific currency market. Repeating our analysis for new issuers and for seasoned issuers separately, we find that the effects of the EMU are larger for new issuers than for those firms that issued both before and after the introduction of the euro, as we expected. Again, financial firms remain largely unaffected. These results are important because over time the decisions made by unseasoned issuers are likely to drive the global pattern of currency denomination, as some seasoned issuers will eventually exit the market. Moreover, the forces tying issuers to a specific currency, such as informational asymmetries across markets, are also likely to diminish with time. Therefore, if unseasoned firms are systematically more sensitive to changes in market volumes, such as those associated with the advent of the euro, aggregate studies of the initial response to the launch of the EMU are likely to underestimate the magnitude of the longer-run impact of the EMU. To further isolate the extensive and the intensive margins of the overall increase in euro-denominated issues, we compare the changes in volumes of debt issued in euros and other currencies by new and seasoned firms. We find a positive, but insignificant, impact of the launch of the euro on the volume of euro-denominated issues by firms that issued both in future euro-area national currencies prior to the launch of the EMU and in euros afterwards. Among the full set of seasoned firms we find a positive statistically and economically significant impact. This provides indirect evidence that the euro effect among seasoned firms was stronger among those that had previously not issued in euro. We also find that the impact of the EMU launch on unseasoned issuers was higher than for the full sample. This would be expected, as both unseasoned issuers and those that had not previously issued in euro would be more likely to respond to the increased scale economies presented by the launch of the euro. Finally, to focus on the impact the advent of the euro may have had on euro-area issuers, we extend the model to allow future monetary union countries to differ by size. The model predicts that the volume of issuance in euro will rise among all future monetary union members, with the impact of the union being largest for firms in smaller monetary union countries. To test this prediction, we repeat our empirical analysis for international bond issues by the euro-area firms and include among our control variables a measure of each country's currency share in the overall pre-EMU issuance in currencies of future EMU countries. We also interact the currency share with the EMU indicator, allowing the estimate of the EMU effect to vary with the importance of the country's currency in the euro-area bond issuance. We find, consistent with the model's prediction, that the effect of EMU is larger for firms from smaller euro-area countries. In fact, we find no statistically significant effect of the advent of the euro on currency denomination of bonds issued by all firms from Germany and seasoned firms from France. For firms from smaller countries, we find a statistically and economically significant increase in the probability of denominating their international bond issues in euros after its adoption. The remainder of this paper is divided as follows. Section 2 presents the model and its testable implications. Section 3 lays out in detail our empirical approach. Section 4 describes our data sources and characterizes the sample. Section 5 presents our empirical results. Section 6 presents the extension of our model and our empirical analysis to the euro area firms. Section 7 concludes with final remarks.

In this paper we use micro-level data to analyze the impact that the launch of the EMU had on the currency denomination of international bond issues. While the increase in bond issuance in the currencies of the euro area after the launch of the EMU has been documented at the aggregate level, to our knowledge ours is the first systematic analysis of this issue at the micro level. Because complete data on domestic bond issuance are not available, we concentrate our study on testing whether the impact of the launch of the monetary union on currency-of-issuance decisions by firms located in outsider countries, i.e., both outside the future euro area and the United States, is consistent with our stylized model. Micro–level analysis allows us to study separately financial and nonfinancial firms and to determine the relative importance of the channels through which this increase took place. We find that the bulk of the increase occurred among nonfinancial firms, and do not even find a significant euro effect among financial firms. This suggests that financial firms, which are quite adept at hedging currency risk and conducting international transactions, were closer to their optimal exposure to euro area currencies prior to the launch of the EMU and did not increase that exposure markedly afterwards. In contrast, we find a substantial statistically significant euro effect for nonfinancial firms. We then examine the channels through which this increase in euro denomination by nonfinancial firms took place. We find that the increase in the issuance of euro-denominated bonds by nonfinancial firms was mainly driven by a large increase in the propensity of new entrants to the international bond market to denominate their first bond issues in euros, and by the increase in the number of firms that continued issuing in euros once they entered that market. We do not find significant evidence of an increase in the shares of euro issuance by firms that were already active issuers in the currencies of future EMU members before the launch of the EMU. Using a multinomial logit specification, we also find that most of the increase in euro issuance was at the expense of dollar issuance. Taken together, these findings suggest that we might expect the launch of the euro to accelerate the decline in the share of dollar-denominated issues in international bond markets: First, the bulk of the increase in euro-denominated bond issues occurred through an increase in euro-denominated issuance by new issuers, and we would expect the decisions made by these new issuers to become more representative going forward, as characteristics tying firms to individual currencies are likely to weaken over time. Second, the increase in euro-denominated issues came largely at the expense of the dollar. It therefore appears that on average firms that issue in dollars are less tied to that currency than firms that issue in other currencies, such as yen or pounds. This would be intuitive, since the dominant position of the dollar would likely leave it the currency denomination of choice for firms that had little preference over currency denominations. However, as the market for bonds denominated in euros continues to grow, these more footloose firms will be the most likely to respond to the increased liquidity in euro-denominated bond markets by switching to that currency. Since these firms are most likely to be initially issuing in dollars, these increases are likely to come at the expense of the share of dollar-denominated issues and may portend further declines in the share of dollar-denominated issues in this market. Finally, we analyze the effects of the launch of the EMU on the firms that are located in the euro area. We find that the increase in the issuance of the euro-area denominated bonds sold on international bond markets is larger for firms located in smaller rather than in larger euro-area countries, as expected.