Secondary Market Transparency and Corporate Bond Issuing Costs

56 Pages Posted: 1 Dec 2016 Last revised: 20 Jan 2020

See all articles by James Brugler

James Brugler

University of Melbourne - Department of Finance

Carole Comerton-Forde

UNSW Business School; Financial Research Network (FIRN)

J. Spencer Martin

University of Melbourne - Faculty of Business and Economics; Financial Research Network (FIRN)

Date Written: January 20, 2020

Abstract

Mandated post-trade transparency in secondary markets lowers the cost of issuing corporate bonds. We show that costs are lower due to the mitigation of information asymmetry. Three pieces of evidence support this finding. First, new issues with higher asymmetric information experience larger cost reductions than issues with lower information asymmetry. Second, when a relatively larger fraction of trades in comparable bonds are made publicly available, new issue pricing improves. Finally, customer trades become more informed with post-trade transparency.

Keywords: corporate bonds, capital costs, market transparency

JEL Classification: G11, G12, G14, G18

Suggested Citation

Brugler, James and Comerton-Forde, Carole and Martin, J. Spencer, Secondary Market Transparency and Corporate Bond Issuing Costs (January 20, 2020). Available at SSRN: https://ssrn.com/abstract=2875165 or http://dx.doi.org/10.2139/ssrn.2875165

James Brugler (Contact Author)

University of Melbourne - Department of Finance ( email )

Faculty of Business and Economics
Parkville, Victoria 3010 3010
Australia

Carole Comerton-Forde

UNSW Business School ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

J. Spencer Martin

University of Melbourne - Faculty of Business and Economics ( email )

Faculty of Economics and Commerce
Parkville, Victoria 3010 3010
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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