Quotation Ottonello, Giorgio, Nagler, Florian. 2017. Structural Changes in Corporate Bond Underpricing. FMA Conference Boston, Boston , United States/USA, 11.10-14.10.


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Abstract

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.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Paper presented at an academic conference or symposium
Language English
Title Structural Changes in Corporate Bond Underpricing
Event FMA Conference Boston
Year 2017
Date 11.10-14.10
Country United States/USA
Location Boston
URL https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2896758
JEL G12, G32

Associations

People
Ottonello, Giorgio (Former researcher)
External
Nagler, Florian (Bocconi University and IGIER, Italy)
Organization
Institute for Financial Research IN (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5358 Corporate finances (Details)
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