How Do Emerging Debt Market Participants Recognize Firm Internationalization? Evidence From Effects on Credit Ratings

Abstract

We explore the firm internationalization’s impact on firm credit ratings in emerging economies. Adopting Chinese data from 2009 to 2018, we document that firm internationalization varies negatively with its credit ratings, indicating that emerging debt market participants are risk averse and prioritize the risks involved in firm internationalization endeavors. This association is amplified for firms operating in host countries with lower institutional quality, decreased cultural distance from home countries, and when firms do not hold tax haven subsidiaries. We observe that the main association is consistent when alternative dataset (India, Russia, and Brazil) or proxy (cost of debt) is applied.

Bowen Tan

Ph.D. Candidate in Economics

Bowen Tan is a job market candidate in empirical health economics on the 2023 - 2024 job market.