Shareholders as Creditors of First Resort

Andriy Bodnaruk () and Marco Rossi ()
Additional contact information
Andriy Bodnaruk: College of Business Administration, University of Illinois at Chicago, Chicago, Illinois 60607
Marco Rossi: Illinois at Chicago, Chicago, Illinois 60607; b Mays Business School, Texas A&M University, College Station, Texas 77843

Management Science, 2021, vol. 67, issue 3, 1737-1757

Abstract: We show that a firm’s ability to access the public bond market for the first time is greatly improved when habitual dual holders (HDHs)—financial conglomerates that tend to simultaneously hold both equity and bonds of their portfolio firms—are among its shareholders. HDHs are more likely to buy bonds in a bond initial public offering (IPO) and to take larger bond positions than bond investors with no equity in the firm. Greater equity ownership by HDHs is associated with a higher fraction of the issue ending up in the hands of pre-IPO shareholders, lower offering yield spreads, and more covenants overall but fewer covenants that restrict payout to shareholders. This paper was accepted by Renee Adams, finance.

Keywords: dual holders; shareholders; bondholders; bond initial public offerings (IPOs) (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1287//mnsc.2019.3556 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:67:y:2021:i:3:p:1737-1757

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().