Bank Trading Networks and Access to the Corporate Bond Market

70 Pages Posted: 7 Dec 2022 Last revised: 9 Dec 2022

See all articles by Giorgio Ottonello

Giorgio Ottonello

Nova School of Business and Economics

Antonino Emanuele Rizzo

Nova School of Business and Economics

Rafael Zambrana

University of Notre Dame - Mendoza College of Business

Date Written: April 19, 2022

Abstract

We show that a firm's access to the corporate bond market is constrained by its bank's trading networks. Using a hand-collected dataset of aggregate portfolio transactions between a bank's securities dealer and their institutional investor's clients, we map the trading networks of banks' underwriters. Exploiting shocks to bank-issuer relationships and the capital supplied by investors in the bank's network, we find that access to a larger network through the underwriting bank increases the probability and size of bond financing. Underwriting banks with a larger network can more easily reach primary market investors, allowing firms to issue cheaper bonds due to lower demand uncertainty.

Keywords: trading relationships, bank-investor networks, corporate bonds, firm financing, asset managers, institutional investors

JEL Classification: G12, G32

Suggested Citation

Ottonello, Giorgio and Rizzo, Antonino Emanuele and Zambrana, Rafael, Bank Trading Networks and Access to the Corporate Bond Market (April 19, 2022). Available at SSRN: https://ssrn.com/abstract=4287217 or http://dx.doi.org/10.2139/ssrn.4287217

Giorgio Ottonello (Contact Author)

Nova School of Business and Economics ( email )

Campus de Carcavelos
Rua da Holanda, 1
Carcavelos, 2775-405
Portugal

HOME PAGE: http://https://sites.google.com/view/gi8nello

Antonino Emanuele Rizzo

Nova School of Business and Economics ( email )

Campus de Carcavelos
Rua da Holanda, 1
Carcavelos, 2775-405
Portugal

Rafael Zambrana

University of Notre Dame - Mendoza College of Business ( email )

Notre Dame, IN 46556-5646
United States

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