Corporate Bond Pricing and Ownership Heterogeneity

53 Pages Posted: 4 Nov 2015

See all articles by Kershen Huang

Kershen Huang

Nova Southeastern University - H. Wayne Huizenga School of Business & Entrepreneurship

Alex Petkevich

University of Denver

Date Written: November 3, 2015

Abstract

We examine how heterogeneity in institutional equity ownership affects bondholders. Firms with larger short-term (long-term) institutional ownership are associated with higher (lower) future bond yield spreads. The adverse effect of short-term ownership on bond pricing is driven by issuing firms that have larger financial distress risk and larger equity volatility. The favorable effect of long-term ownership appears to be more systematic. Further, this bond pricing effect is stronger in cases where shareholder rights are relatively weak. Finally, the effect of short (long) horizons is driven by concentrated (diffused) institutional holdings.

Keywords: Agency cost of debt, information, institutional investors, investment horizon

JEL Classification: G12, G32, G34

Suggested Citation

Huang, Kershen and Petkevich, Alex, Corporate Bond Pricing and Ownership Heterogeneity (November 3, 2015). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2685894

Kershen Huang (Contact Author)

Nova Southeastern University - H. Wayne Huizenga School of Business & Entrepreneurship ( email )

3300 S. University Drive
Fort Lauderdale, FL 33328-2004
United States

HOME PAGE: http://bit.ly/kershenhuang

Alex Petkevich

University of Denver ( email )

2101 S. University Blvd.
Denver, CO 80208-8921
United States

HOME PAGE: http://https://sites.google.com/view/alexpetkevich/home

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