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
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
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