International evidence on the cost of public debt issued by private versus public firms

In this study, we revisit the relation between ownership type (public versus private) and the cost of public debt. Based on the literature, we seek insights into the conditions under which private firms should expect to pay a premium and when, alternatively, they might expect to enjoy a cost benefit on issues of public debt relative to public firms. Using an international sample of 630,959 traded bond issues from 2001 to 2017, we initially confirm a higher cost of public debt for the private U.S. firms in our sample. Following, we alternatively confirm a lower cost of public debt for the private non-U.S. firms. Finally, we confirm that, for non-U.S. issuers, the benefit is reduced in jurisdictions with stronger institutional and regulatory frames. Additional tests (alternative econometric approaches, alternative partitions, and firms undertaking an IPO) provide further support. • Initially confirms a higher cost of public debt for private U.S. issuers relative to public firm issuers. • Alternatively confirms a lower cost of public debt for private relative to public non-U.S. issuers. • Confirms the cost differential is dependent on the strength of the institutional and regulatory regime.