Structural Changes in Corporate Bond Underpricing

Beschreibung

We show that in the aftermath of the financial crisis underpricing of corporate bonds increases because underwriters systematically place bonds to relationship investors. We argue that the post-crisis decrease in inventory-carrying capacities incentivizes underwriters to secure future intermediation by outsourcing bonds to related investors, who require in exchange increased underpricing. We isolate the strength of underwriter-investor relations by employing a novel empirical identification strategy based on institutional investors’ past holdings of underwriters’ own bonds. The relationship channel fully captures the increase in underpricing from the pre-crisis to the post-crisis period. Furthermore, it shows that relationship investors are net sellers of newly issued bonds in the post-crisis period. The results are informative about implications of post-crisis regulation.

Zeitraum	11 Okt. 2017 → 14 Okt. 2017
Ereignistitel	FMA Conference Boston
Veranstaltungstyp	Keine Angaben
Bekanntheitsgrad	International