Investor base and corporate borrowing: Evidence from international bonds

We examine international bond issues by US firms to study the benefits of investor taste for cross-border security issuances. We proxy for firms' international investor taste with the fraction of prior international bond holding in firms' domestic and international bonds and find that international investor demand increases with such taste. Moreover, the offering yield spreads on international bonds are lower than domestic offering yield spreads for these internationally recognized firms and they have higher probability of issuing internationally. Such international recognition may occur, for instance, if the diversification benefits of adding the security to investor's portfolio outweigh the negative effects of higher renegotiation costs for international compared to domestic investors.