Disclosures of CEO inside debt and the timing of new bond issuance

Abstract

This paper explores the timing strategies for bond issuance based on disclosures of CEO inside debt by using hand-collected data of U.S. public companies from 2000 to 2019. U.S companies prefer to issue bonds shortly after positive disclosures of inside debt changes but delay the issuance after negative disclosures. The timing behavior is more pronounced when the disclosures are negative or when the holders of the new issues are more vulnerable to the agency problem of debt. The causal impact of inside debt disclosures on bond issuance timing is established by using a DiD analysis based on SEC's revised disclosure rule in 2006. Further analysis shows that this timing strategy is associated with lower offering bond yield spreads.

Keywords: Bond issuance, Disclosure, Executive compensation, Inside debt

JEL Classification: G12, G14, G32, M12