Hedging and choice of currency denomination in international syndicated loan markets

We examine the determinants of the currency denomination of debt decision of Australian and New Zealand firms and compare it with that of Asian firms around the 1997 Asian crisis. We control for location choice, and include firm and country specific determinants. We find hedging is the primary determinant of foreign currency borrowing by Australian and New Zealand firms. In Asian firms, however, firm leverage, the exchange rate regime, country political risk, and interest rate differentials determine the currency denomination of debt. With the exception of Hong Kong based firms, there is no support for the hedging hypothesis in Asian firms.