The Dollar and Corporate Borrowing Costs

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 tha...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc Vol. 2021; no. 1312; pp. 1 - 64
Main Authors Meisenzahl, Ralf R., Niepmann, Friederike, Schmidt-Eisenlohr, Tim
Format Journal Article Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 30.03.2021
Subjects
Participating loans
United States > US
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Summary: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.
ISSN:1073-2500
DOI:10.17016/IFDP.2021.1312