Global Sales, International Currencies and the Currency Denomination of Debt

We document that the currency denomination of the debt of developed country firms is strongly related to the geographical distribution of their sales. On average, a unit increase in the percentage of sales in a country is associated with an equivalent increase in the proportion of debt denominated in the corresponding currency. Consistent with the existence of fixed costs of debt issuance, we find that the relationship between the currency denomination of debt and the geography of sales vanishes below the 5% threshold for sales. Finally, we document significant home currency bias and international currency bias in debt issuance. In particular, we show that, controlling for the geography of sales, firms issue more debt denominated in their home currency and the two most traded currencies, the US dollar and the euro