Do Underwriters Short-Change Corporations Issuing Bonds?

Forthcoming, Journal of Financial and Quantitative Analysis

50 Pages Posted: 4 Apr 2022 Last revised: 3 Jul 2022

See all articles by Jeremy Goh

Jeremy Goh

Singapore Management University - Lee Kong Chian School of Business

Lisa Yang

Montana State University - Bozeman

Date Written: January 25, 2022

Abstract

We confirm prior evidence that bonds on average are offered at prices below their immediate post-offer secondary market prices. However, in cases where banks lead-manage their own bond offerings the underpricing is significantly less as compared to other non-self-marketed offerings. These findings are robust across various matched samples and selection models. Our results suggest that the bond offering process is characterized by substantive agency conflicts between shareholders of corporations (issuers) and underwriters.

Keywords: Corporate Bond, Bond Offerings, Underpricing, Agency Problem

JEL Classification: G14,G24,G32

Suggested Citation

Goh, Jeremy and Yang, Lisa, Do Underwriters Short-Change Corporations Issuing Bonds? (January 25, 2022). Forthcoming, Journal of Financial and Quantitative Analysis, Available at SSRN: https://ssrn.com/abstract=4052561 or http://dx.doi.org/10.2139/ssrn.4052561

Jeremy Goh (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

Lisa Yang

Montana State University - Bozeman ( email )

Bozeman, MT 59717-2920
United States

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