Corporate Bond Flipping

78 Pages Posted: 17 Feb 2022 Last revised: 20 Apr 2022

See all articles by Stanislava (Stas) Nikolova

Stanislava (Stas) Nikolova

University of Nebraska - Lincoln

Liying Wang

University of Nebraska at Lincoln

Date Written: February 2, 2022

Abstract

In this paper, we provide the first empirical evidence on corporate bond flipping. Analyzing 2002-2018 insurer trades, we show that when flipping their allocation in an offering, insurers avoid selling to the underwriters despite underwriters providing better prices. Offerings with worse aftermarket performance are flipped less, but the flipping-to-performance sensitivity is similar when flipping to underwriters or non-underwriters, suggesting that underwriters discourage flipping in both overpriced and underpriced offerings. Insurers flipping to the underwriters receive less profitable allocations in these underwriters' subsequent offerings. Our findings suggest that underwriters can partially limit flipping by using their allocation discretion to penalize flippers.

Keywords: Corporate bonds, primary market, secondary market, allocations, flipping, underpricing, insurance companies, underwriters, dealers

JEL Classification: G14, G22, G24, G28, G30

Suggested Citation

Nikolova, Stanislava (Stas) and Wang, Liying, Corporate Bond Flipping (February 2, 2022). Available at SSRN: https://ssrn.com/abstract=4024356 or http://dx.doi.org/10.2139/ssrn.4024356

Stanislava (Stas) Nikolova

University of Nebraska - Lincoln ( email )

Lincoln, NE 68588-0490
United States
402-472-6049 (Phone)

Liying Wang (Contact Author)

University of Nebraska at Lincoln ( email )

Lincoln, NE 68588
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
63
Abstract Views
287
rank
478,861
PlumX Metrics