Debt IPO Waves

31 Pages Posted: 21 Aug 2012 Last revised: 5 Mar 2013

See all articles by Kelly Nianyun Cai

Kelly Nianyun Cai

University of Michigan at Dearborn - School of Management

Xiaoquan Jiang

Florida International University (FIU) - Department of Finance

Hei Wai Lee

University of Michigan at Dearborn - School of Management

Date Written: August 20, 2012

Abstract

We examine aggregate volume of straight debt IPOs issued by nonfinancial firms over an extended period of 1970 to 2010. We find that aggregate debt IPO activities display wave patterns. Similar to equity IPOs, both the number and total proceeds of debt IPOs vary substantially over time. We explore possible explanations for the debt IPO waves with four groups of variables - capital market conditions, investor sentiment, information asymmetry, and interest rates. Our results indicate that debt IPO volume is significantly associated with term spread, stock return volatility and interest rates, suggesting that bond market conditions and information asymmetry play significant roles in explaining time variations in debt IPO volume. However, we do not find a significant role for investor sentiment. We also document that debt IPOs and equity IPOs are mutually Granger caused, suggesting that debt IPOs and equity IPOs tend to move together.

Keywords: Debt IPOs, Information, Waves

Suggested Citation

Cai, Kelly Nianyun and Jiang, Xiaoquan and Lee, Hei Wai, Debt IPO Waves (August 20, 2012). Midwest Finance Association 2013 Annual Meeting Paper. Available at SSRN: https://ssrn.com/abstract=2132842 or http://dx.doi.org/10.2139/ssrn.2132842

Kelly Nianyun Cai (Contact Author)

University of Michigan at Dearborn - School of Management ( email )

19000 Hubbard Dr.
Dearborn, MI 48126
United States

Xiaoquan Jiang

Florida International University (FIU) - Department of Finance ( email )

University Park
11200 SW 8th Street
Miami, FL 33199
United States

Hei Wai Lee

University of Michigan at Dearborn - School of Management ( email )

4901 Evergreen Road
Dearborn, MI 48128-1491
United States
313-593-5524 (Phone)
313-593-5636 (Fax)

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