The Information Environment and Borrowing Costs in International Bond Markets

We examine whether and how a firm's information environment – as characterized by earnings quality, analyst forecast dispersion, and the probability of informed trading – affects its borrowing costs in international bond markets. Using a sample of Eurobonds issued by firms across 38 countries, we find that bonds issued by firms with poor information environments are associated with higher costs of debt, lower credit ratings, greater probability of split bond ratings, and higher underwriting fees. Thus, we demonstrate that the information environment plays a crucial role in determining borrowing costs in international bond markets.