How Does the Creditor Conflict Affect Bond IPO Underpricing?

Journal of Finance and Data Science, Forthcoming

46 Pages Posted: 17 Mar 2021 Last revised: 10 Apr 2021

See all articles by Xinjie Wang

Xinjie Wang

Southern University of Science and Technology

Yuan Wang

Concordia University, Quebec

Xueying Zhang

ShanDong University of Finance and Economics

Date Written: March 15, 2021

Abstract

In this paper, we find that the conflict of interest between loan holders and bondholders is positively related to bond IPO underpricing, which serves as a compensation to the initial bond investors. We construct four proxies for the conflict between loan holders and bondholders, namely, a loan covenants index, the outstanding loan amount, the number of lead banks, and the loan remaining maturity. Our empirical tests show that all four variables are positively related to bond IPO underpricing, indicating that the loan structure of firms has a real impact on the pricing of their bond IPOs.

Keywords: bond, IPO underpricing

Suggested Citation

Wang, Xinjie and Wang, Yuan and Zhang, Xueying, How Does the Creditor Conflict Affect Bond IPO Underpricing? (March 15, 2021). Journal of Finance and Data Science, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3804815

Xinjie Wang

Southern University of Science and Technology ( email )

1088 Xueyuan Blvd
Xili, Nanshan District
Shenzhen, Guangdong 518055
China

Yuan Wang (Contact Author)

Concordia University, Quebec ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1MB
Canada

Xueying Zhang

ShanDong University of Finance and Economics ( email )

JiNan
China

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