When less is not always more: Issue frequency and borrowing costs in commercial paper market

Vidya Kamate and Abhishek Ranjan

Economics Letters, 2025, vol. 254, issue C

Abstract: Despite being issued by sizable, financially sound corporations with strong ratings, commercial papers (CPs) exhibit significant yield differences, even among entities within the same rating bracket. We provide novel empirical evidence of an important factor that determines CP yields i.e. frequency of CP issuance. Using data on primary CP issues in India, we find that borrowing costs are significantly lower for each subsequent issue of a CP issuer. Consistent with asymmetric information channel, we find that yield premium for infrequent issues is higher in periods of heightened information asymmetry such as high equity market volatility and COVID-19 pandemic period.

Keywords: Commercial paper yields; Asymmetric information; Infrequent issuers; COVID-19 pandemic (search for similar items in EconPapers)
JEL-codes: E43 G14 G20 G21 G23 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:254:y:2025:i:c:s0165176525002964

DOI: 10.1016/j.econlet.2025.112459

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