Quotation Ottonello, Giorgio, Nagler, Florian. 2017. Structural Changes in Corporate Bond Underpricing.




We show that in the aftermath of the financial crisis underpricing of corporate bonds increases because underwriters systematically place bonds to relationship investors. We argue that the post-crisis decrease in inventory-carrying capacities incentivizes underwriters to secure future intermediation by outsourcing bonds to related investors, who require in exchange increased underpricing. We isolate the strength of underwriter-investor relations by employing a novel empirical identification strategy based on institutional investors’ past holdings of underwriters’ own bonds. The relationship channel fully captures the increase in underpricing from the pre-crisis to the post-crisis period. Furthermore, it shows that relationship investors are net sellers of newly issued bonds in the post-crisis period. The results are informative about implications of post-crisis regulation.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Working/discussion paper, preprint
Language English
Title Structural Changes in Corporate Bond Underpricing
Year 2017
URL https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2896758
JEL G12, G32


Ottonello, Giorgio (Former researcher)
Nagler, Florian (Bocconi University and IGIER, Italy)
Institute for Financial Research IN (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5358 Corporate finances (Details)
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