Firm internationalization and the Debt Cost of Capital: Evidence from publicly traded debt in the US

Abstract: This paper examines the association between the firm internationalization and the cost of debt using bond credit ratings and bond credit spreads. Replicating the paper by Reeb, Mansi and Allee (2001) and then extending the study with more recent data from the period 2002-2019, we confirm their findings that higher levels of firm international activity are associated with a lower debt cost of capital. However, we also show that the method used does not hold when adding firm fixed effects to the model. Unlike Reeb, Mansi and Allee (2001), we do not observe a further association between international activity and the cost of debt, beyond that already captured in credit ratings.