Global Dollar Credit and Carry Trades : A Firm-Level Analysis

We conduct a firm-level analysis of borrowing in US dollars by non-financial corporates from outside the United States. The dataset combines bond issuance data with firm-level financial information. We find that firms with already high cash holdings are more likely to issue US dollar-denominated bonds, and that the proceeds of the bond issue add to cash holdings. The tendency to borrow in dollars is more pronounced during periods when the dollar carry trade is more favourable and is prevalent for emerging market firms. The use of bond proceeds by emerging market firms points to financial decisions that bear an outward resemblance to carry trades, rather than precautionary borrowing in anticipation of future financing needs