Do underwriters short-change corporations issuing bonds?

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 a...

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Bibliographic Details
Main Authors: GOH, Choo Yong, Jeremy, YANG, Lisa
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2022
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Online Access:https://ink.library.smu.edu.sg/lkcsb_research/7023
https://ink.library.smu.edu.sg/context/lkcsb_research/article/8022/viewcontent/SSRN_id4052561.pdf
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Institution: Singapore Management University
Language: English
Description
Summary: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.