Does Ownership Concentration Affect Corporate Bond Volatility?

61 Pages Posted: 22 May 2020 Last revised: 20 Jul 2021

See all articles by Yan Wang

Yan Wang

McMaster University

Ying Wang

State University of New York at Albany - School of Business

Date Written: April 12, 2020

Abstract

This paper analyzes the relation between ownership concentration and corporate bond volatility. We show that more concentrated mutual fund ownership is associated with higher volatility of corporate bonds. This relation is stronger among more illiquid bonds, during periods of heightened bond market illiquidity, and among bonds held by corporate bond funds that invest in more illiquid assets and experience higher or more correlated liquidity shocks. Using a sample of fund mergers, we further show that increases in bond volatility are not driven by the endogenous ownership structure of bonds, but rather the non-fundamental liquidity demand of large concentrated asset owners.

Keywords: Ownership concentration, bond volatility, corporate bonds, corporate bond funds, bond illiquidity, liquidity shocks, price fragility

JEL Classification: G12, G23

Suggested Citation

Wang, Yan and Wang, Ying, Does Ownership Concentration Affect Corporate Bond Volatility? (April 12, 2020). Available at SSRN: https://ssrn.com/abstract=3586964 or http://dx.doi.org/10.2139/ssrn.3586964

Yan Wang (Contact Author)

McMaster University ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

Ying Wang

State University of New York at Albany - School of Business ( email )

1400 Washington Ave.
Albany, NY 12222
United States

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