Three essays on long-term borrowing, corporate finance and exchange rates

Firms move capital across boundaries to optimize their financial status. Here I present three essays that study different aspects of this phenomenon. The first essay conducts a purely theoretical analysis of a firm that can borrow in different currencies and incurs irreversible cost such as flotation cost each time it borrows. The essay simplifies the problem into a two country scenario and identifies the factors that influence the firm's debt structure. The second essay uses one of the conclusions developed in this chapter to test the effect of transaction costs in the long term currency swap market. The third paper brings the problem back to the firm level again. Here I develop a decision tool for the firm. I do not just look at the borrowing decisions of a firm, but look at them in the context of overall financial optimization of the firm. The model allows the decision maker to pick locations of debt, transfer price and equity/debt ratio that optimize the cash flow of a multinational firm.