Where do firms issue debt? An empirical analysis of issuer location and regulatory competition in Europe

In this article, we study the choice of issuer location and regulatory competition in the European corporate debt market. We find that, in absolute terms, Germany has by far the highest outflow of debt issues, while the Netherlands, the UK, Ireland, and Luxembourg see the most inflows (in that order). We use a panel gravity model to investigate country specific factors attracting foreign subsidiaries as issuers. The data clearly support the prediction that the locational choice is positively influenced by a low withholding tax rate. We find only mixed evidence that corporate tax rates play a role. In contrast to previous results of the ‘law and finance’ literature, we do not find support for creditor protection rules in bankruptcy as a driver of cross-border debt securities issues.