The Pricing of Initial Public Offers of Corporate Straight Debt

J. OF FINANCE

Posted: 14 Oct 1996

See all articles by Sudip Datta

Sudip Datta

Wayne State University - Finance Department

Mai Iskandar-Datta

Wayne State University - Finance Department

Ajay Patel

Wake Forest University, School of Business

Abstract

This study examines the initial-day and aftermarket price performance of corporate straight debt IPOs. We find that IPOs of speculative grade debt are underpriced like equity IPOs, while those rated investment grade are overpriced. IPOs of investment grade debt are typically issued by firms listed on the major exchanges and underwritten by prestigious underwriters. In contrast, junk bond IPOs are more likely to be handled by less prestigious underwriters and are typically issued by OTC firms. Our analysis also reveals that bond rating, market listing of the firm, and investment banker quality are significant determinants of bond IPO returns.

JEL Classification: G30

Suggested Citation

Datta, Sudip and Iskandar-Datta, Mai E. and Patel, Ajay, The Pricing of Initial Public Offers of Corporate Straight Debt. J. OF FINANCE. Available at SSRN: https://ssrn.com/abstract=7808

Sudip Datta (Contact Author)

Wayne State University - Finance Department ( email )

328 Prentis Bldg.
5201 Cass Avenue
Detroit, MI 48202
United States
(313) 577- 0408 (Phone)
(313) 577-0058 (Fax)

Mai E. Iskandar-Datta

Wayne State University - Finance Department ( email )

328 Prentis Bldg.
5201 Cass Avenue
Detroit, MI 48202
United States
(313) 577-9509 (Phone)

Ajay Patel

Wake Forest University, School of Business ( email )

1834 Wake Forest Road
Building 60, Farrell Hall
Winston-Salem, NC 27106
United States
336-758-5575 (Phone)
336-758-4514 (Fax)

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