Global Demand Spillovers in Corporate Bond Issuance: The Effect of Underwriter Networks

43 Pages Posted: 13 Jan 2020 Last revised: 4 Mar 2020

See all articles by Kerry Siani

Kerry Siani

Columbia University - Columbia Business School

Date Written: December 30, 2019

Abstract

This paper studies how monetary policy shocks propagate across borders through bond issuance networks of firms, underwriters and investors. Using a difference-in-differences strategy, I find that the European Central Bank's quantitative easing program in 2016 spilled over to the U.S. corporate bond issuance market via an underwriting channel. U.S. firms connected to underwriters with more Eurozone investor clients faced greater orders for their bonds, achieved a lower cost of capital, and ended up issuing more bonds. The underlying mechanism is likely driven by costly search that underwriters face in locating potential investors, which incentivizes maintaining investor relationships for repeated business. As such, investor demand shocks transmitted through underwriters affect issuers heterogeneously based on preexisting issuer-underwriter-investor networks.

Keywords: Unconventional monetary policy, quantitative easing, securities underwriting, corporate bonds

JEL Classification: G24, G15, E52, E44

Suggested Citation

Siani, Kerry, Global Demand Spillovers in Corporate Bond Issuance: The Effect of Underwriter Networks (December 30, 2019). Available at SSRN: https://ssrn.com/abstract=3508937 or http://dx.doi.org/10.2139/ssrn.3508937

Kerry Siani (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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