The Currency-of-Denomination Decision for Debt Financing

S. Ghon Rhee; Rosita P. Chang; Peter E. Koveos

doi:10.1057/palgrave.jibs.8490465

The Currency-of-Denomination Decision for Debt Financing

S. Ghon Rhee, Rosita P. Chang, Peter E. Koveos

Whitman School of Management

Research output: Contribution to journal › Article › peer-review

7 Scopus citations

Abstract

This paper examines the currency-of-denomination decision for long-term debt financing in the presence of corporate income taxes and flotation costs. The numerical analysis provides convincing evidence that the “tax effect” dominates the “flotation cost effect” unless the firm operates in tax haven countries. Hence, the conventional decision rule still applies to the choice of currency in which to borrow or to lend: Borrow in the weakest currency and lend in the strongest.

Original language	English (US)
Pages (from-to)	143-150
Number of pages	8
Journal	Journal of International Business Studies
Volume	16
Issue number	3
DOIs	https://doi.org/10.1057/palgrave.jibs.8490465
State	Published - Sep 1 1985

ASJC Scopus subject areas

Business and International Management
General Business, Management and Accounting
Economics and Econometrics
Strategy and Management
Management of Technology and Innovation

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The Currency-of-Denomination Decision for Debt Financing

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