Quotation Gu, Y. J., Filatotchev, Igor, Bell, R.G., Rasheed, A. A. 2019. Liability of foreignness in capital markets: Institutional distance and the cost of debt. Journal of Corporate Finance. 57 142-160.


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Abstract

We extend the domain of liability of foreignness (LOF) research to capital markets and evaluate whether firms incur LOF when attempting to raise debt capital abroad. We rely upon multiple conceptualizations of institutional distance to capture the extent to which distance may contribute to LOF in capital markets. Based on a sample of 361 firms from 45 countries over a 24 year time period, we find that institutional distances lead to increased cost of debt. More importantly, we find that frequency of foreign bond issuance helps to mitigate the LOF. We conclude with a discussion of our results and their implications for future research on understanding how firms address LOF when sourcing debt abroad.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Journal of Corporate Finance
Citation Index SSCI
WU Journalrating 2009 A
WU-Journal-Rating new FIN-A, STRAT-B, VW-C, WH-A
Language English
Title Liability of foreignness in capital markets: Institutional distance and the cost of debt
Volume 57
Year 2019
Page from 142
Page to 160
Reviewed? Y
DOI https://doi.org/10.1016/j.jcorpfin.2017.10.014
Open Access N

Associations

People
Filatotchev, Igor (Details)
External
Bell, R.G. (Gupta College of Business, University of Dallas, United States/USA)
Gu, Y. J. (Gupta College of Business, University of Dallas, United States/USA)
Rasheed, A. A. (College of Business, University of Texas at Arlington, United States/USA)
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