Corporate bond pricing and ownership heterogeneity

Kershen Huang () and Alex Petkevich

Journal of Corporate Finance, 2016, vol. 36, issue C, 54-74

Abstract: We examine how heterogeneity in institutional equity ownership affects bondholders. Firms with larger short-term (long-term) institutional ownership are associated with higher (lower) future bond yield spreads. The adverse effect of short-term ownership on bond pricing is driven by issuing firms that have larger financial distress risk and larger equity volatility. The favorable effect of long-term ownership appears to be more systematic. Further, this bond pricing effect is stronger in cases where shareholder rights are relatively weak. Finally, the effect of short (long) horizons is driven by concentrated (diffused) institutional holdings.

Keywords: Agency cost of debt; Information; Institutional investors; Investment horizon (search for similar items in EconPapers)
JEL-codes: G12 G32 G34 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:36:y:2016:i:c:p:54-74

DOI: 10.1016/j.jcorpfin.2015.11.001

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