The Decision to First Enter the Public Bond Market: The Role of Firm Reputation, Funding Choices, & Bank Relationships

Posted: 23 Jan 2008

See all articles by Galina Hale

Galina Hale

Federal Reserve Bank of San Francisco

João A. C. Santos

Federal Reserve Bank of New York

Multiple version iconThere are 2 versions of this paper

Abstract

This paper uses survival analysis to investigate the timing of a firm's decision to issue for the first time in the public bond market. We find that firms that are more creditworthy and have higher demand for external funds issue their first public bond earlier. We also find that issuing private bonds or taking out syndicated loans is associated with a faster entry to the public bond market. According to our results, the relationships that firms develop with investment banks in connection with their private bond issues and syndicated loans further speed up their entry to the public bond market. Finally, we find that a firm's reputation has a "U-shaped" effect on the timing of a firm's bond IPO. Consistent with Diamond's (1991) reputational theory, firms that establish a track record of high creditworthiness as well as those that establish a track record of low creditworthiness enter the public bond market earlier than firms with intermediate reputation.

Keywords: bond financing, reputation, bank relationships, duration analysis

JEL Classification: G24, G32

Suggested Citation

Hale, Galina and Santos, João A. C., The Decision to First Enter the Public Bond Market: The Role of Firm Reputation, Funding Choices, & Bank Relationships. Journal of Banking and Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1086422

Galina Hale (Contact Author)

Federal Reserve Bank of San Francisco ( email )

101 Market Street
San Francisco, CA 94105
United States
415-974-3131 (Phone)
415-974-2168 (Fax)

HOME PAGE: http://www.frbsf.org/economic-research/economists/galina-hale/

João A. C. Santos

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-5583 (Phone)
212-720-8363 (Fax)

HOME PAGE: HTTP://WWW.NEWYORKFED.ORG/RMAGHOME/ECONOMIST/SANTOS/CONTACT.HTML

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
861
PlumX Metrics