The Dollar and Corporate Borrowing Costs

RePEc Short ID: psc358
ORCID iD: 0000-0003-0494-9646

Meisenzahl, Ralf R.; Niepmann, Friederike; Schmidt-Eisenlohr, Tim

doi:10.17016/IFDP.2021.1312

Working Paper

The Dollar and Corporate Borrowing Costs

Abstract: We show that U.S. dollar movements affect syndicated loan terms for U.S. borrowers, even for those without trade exposure. We identify the effect of dollar movements using spread and loan amount adjustments during the syndication process. Using this high-frequency, within loan variation, we find that a one standard deviation increase in the dollar index increases spreads by up to 15 basis points and reduces loan amounts and underpricing by up to 2 percent and 7 basis points, respectively. These effects are concentrated in dollar appreciations. Our results suggest that global factors reflected in the dollar affect U.S. borrowing costs.

Keywords: Loan pricing; Syndicated loans; Dollar; Institutional investors; Risk taking;

JEL Classification: F15; G15; G21; G23;

https://doi.org/10.17016/IFDP.2021.1312