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Does the issuance of Eurobonds carry enough information about favourable domestic conditions to warrant more FDI inflows? In this study, the authors investigate how FDI is responding to the rising levels of Eurobonds in sub-Saharan African (SSA).

The study uses the system GMM model to set up a panel with all 17 SSA countries with Eurobonds. The dataset was transformed into time series, and the VAR model and Granger causality were used to diffuse the doubt of a possible bi-causal relationship between Eurobonds and FDI. Additionally, the authors use the impulse response function to test the behaviour of FDI to a one-time shock to Eurobonds.

The study reports that Eurobond levels matter in explaining FDI receipts. Specifically, the authors report that the issuance of Eurobonds leads to a favourable increase in FDI inflows. The authors transform our data into time series and use the VAR model and Granger causality test to diffuse the doubt of a possible bi-causal relationship between Eurobonds and FDI. The authors’ findings from this exercise suggest that two lag levels of Eurobond are a good predictor of future FDI flows. More also, the authors use the impulse response function to test the behaviour of FDI to a one-time shock to Eurobonds and report that a one-unit standard deviation shock to Eurobonds will cause FDI to swell up over at least 8 years.

The study is limited in scope due to data availability. Future studies may consider using countries across the globe that have issued Eurobond to retest the current research objectives.

The study establishes grounds to suggest that the issuance of Eurobonds carry enough information to foreign investors in deciding on the location of FDI.

The study is uniquely opening a new frontier to the discussion on how one international capital can be used to bait other foreign capital. It also discusses signalling theory at the macro level.

This paper aims to investigate how firms from emerging economies choose among different international bond markets: global, US144A and Eurobond markets. The authors explore if the ranking in regulatory stringency –global bonds have the most stringent regulations and Eurobonds have the most lenient regulations – leads to a segmentation of borrowers.

The authors use a novel data set from emerging economy firms, treating them as consolidated entities. The authors also obtain descriptive evidence and perform univariate non-parametric analyses, conditional and multinomial logit analyses to study firms’ marginal debt choice decisions.

The authors show that firms with poorer credit quality, less ability to absorb flotation costs and more informational asymmetries issue debt in US144A and Eurobond markets. On the contrary, firms issuing global bonds – subject to full Securities and Exchange Commission requirements – are financially sounder and larger. This exercise also shows that following the global crisis, firms from emerging economies are more likely to tap less regulated debt markets.

This is, to the authors’ knowledge, the first study that examines if the ranking in stringency of regulation – global bonds have the most stringent regulations and Eurobonds have the most lenient regulations – is consistent with an ordinal choice by firms. The authors also explore if this ranking is monotonic in all determinants or there are firm-specific features which make firms unlikely to borrow in a given market. Finally, the authors analyze if there are any changes in the debt-choice behavior of firms after the global financial crisis.

This study develops an equilibrium model of credit spreads on Japanese yen Eurobonds based on a model proposed by Collin-Dufresne, Goldstein and Martin (2001). We find the asset factor, as proxied by the change in the stock market index, has only a limited effect, while the interest rate factor has the over-riding influence. There is also evidence that currency volatility and changes in the term structure occasionally have an effect on spread behaviour. Analysis over several subperiods, based around key economic events, demonstrates that the relative weight of these explanatory variables change over time.

Financial intermediaries have contributed to the growing complexity of transactions and to an emerging relational network within markets. This article considers the Eurobond market as an organization in which members adopt rationalities along with diversified and evolving courses of action. The purpose of this paper is to mobilize both historical analysis and organizational theories to show what history can bring to organizational theories using a specific financial market as a case study.

The author used a methodology based on historical events and on a long-run analysis of practices. Professional sources, academic research and databases allow the author to follow an abductive approach. Observations set out of this double perspective are confronted with the conceptual frames of organizational theories.

During the creation and organization stage, the Eurobond market adopts the pattern of a market organization. Then, it takes the pattern of a firm organization as defined by Coase and Alchian and Demsetz or it is a hybrid pattern as Williamson corpus is concerned. In its last stage of evolution, it reveals as a firm organization for all economic models of organizations.

The confrontation of an historical methodology with the economic model of organization leads to the conclusion that the Eurobond market cannot be apprehended as an organization market anymore since it has become a firm organization. Traditional regulation of financial markets does not apply since a firm pattern cannot be controlled as a market one.

In October 2020, Zambia failed to make a $42.5 million interest payment on $1 billion in Eurobonds maturing in 2024, becoming the first African country to default on its debt obligations in the aftermath of COVID-19. Zambia's default highlights the fragmented nature of governance in sovereign debt markets. The Zambian default also underscores the continuing impact of colonial hangover in former colonies in Africa. Fragmented governance and colonial overhang create incentives for both debtors and creditors that contribute to cycles of sovereign debt. These cycles of debt pose a particular hazard to residents within countries that issue such debt. In African contexts, this has led to flows of funds for debt repayment that may significantly jeopardize the well-being of people who are already poor. Zambia's default also reflects the increasing need of African countries to navigate among different external actors, particularly China, which has given loans throughout Africa for varied projects, including infrastructure lending as part of its Belt and Road Initiative. The Zambian default draws attention to the significant amount of Eurobond debt African countries have incurred in recent years and the burdens that such debt may impose. The circumstances of Zambia's default, as well as recent disputes about external debt in Mozambique, reflect continuing issues about transparency and public scrutiny of sovereign debt transactions and the broader societal impact of debt internally within African countries and in relations between African countries and varied external powers.

The purpose of this paper is to propose a Clarke-Groves Tax (CGT) type as a remedy to the criticism that the implementation of Eurobonds has raised regarding the risk of undermining fiscal discipline. In this model, a government minimizes its sovereign debt-to-GDP ratio in a given period and decides whether to join a common sovereign debt club. In doing so, it exposes itself to a positive or negative tax burden while benefiting from the liquidity premium involved in creating a secure asset. The authors found that the introduction of this tax may prevent free riding behaviours if Eurobonds were to be implemented. To illustrate this, the authors provide some numerical simulations for the Eurozone.

In the model presented, a government which optimizes a social utility function decides whether to join the common debt club.

The adoption of the proposed tax could prevent free-riding behaviours and, therefore, encourages participation by those countries with lower debt levels that would have not otherwise taken part in this common debt mechanism. Under certain circumstances, we can expect the utility of all members of this club to improve. The bias in the distribution of gains might be mitigated by regulating the tax rule determining the magnitude of payment/reward. The proportion of the liquidity premium, arising from the implementation of a sovereign safe asset, has a decisive impact on the degree of the governments’ utility enhancement.

The adoption of a CGT would require Eurobonds club members to reach an agreement on “the” theoretical model for determining the sovereign debt yield. One of the limitations of this model is considering the debt-to-GDP ratio as the sole determinant of public debt yields. Moreover, the authors assumed the relationship between the debt-to-GDP ratio and funding costs to be identical for all countries. Any progress in the implementation of the proposed transfer scheme would require a more realistic and in-depth analysis.

A new fiscal rule based on compensating countries with lower public debt levels could be a way to mitigate free-riding problems if a Eurobond mechanism is to be established.

This fiscal rule has not been proposed or analysed before in a context such as that considered by this paper.

Although the Eurobond market has been reasonably welldeveloped for almost two decades, only recently has there been a proliferation of equity‐linked Eurobonds, as issuers have attempted to respond to historically high Eurobond interest rates and the opportunities to reduce the nominal yield of issues by providing for conversion of the bond or by attaching warrants for purchase of the stock of the issuer. From 1979 to 1983, some twenty‐three corporate issuers have attached warrants for stock purchase to Eurobond issues which were denominated in a currency different from that of the jurisdictional headquarters of the parent; twenty‐one issues were denominated in dollars, one (Jusco) in German marks, and one (Schering AG) in sterling. By nationality, nine issues were made by German firms, all of which are industrial leaders or major banks; seven issuers were Japanese; three, British; two, Swiss (both banks); and two Canadian (both Seagrams Co.).