Secondary Market Transparency and Corporate Bond Issuing Costs
56 Pages Posted: 1 Dec 2016 Last revised: 20 Jan 2020
Date Written: January 20, 2020
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: Suggested Citation