The execution quality of corporate bonds

Hara, Maureen O’, Yihui Wang and (Alex) Zhou, Xing

Journal of Financial Economics, 2018, vol. 130, issue 2, 308-326

Abstract: This paper investigates execution quality issues in corporate bond trading. Using an extensive sample of bond trades by insurance companies, we find that an insurance company entering a trade of similar size and on the same side for the same bond on the same day with the same dealer will receive a better price if the insurance company is a more active trader than if it is a less active trader. Trading with the dominant dealer or underwriter worsens these differentials, while greater transparency and smaller trading networks lessens these effects. Our results provide strong evidence that execution quality differences remain pervasive in corporate bond trading.

Keywords: Execution quality; Corporate bonds; Market microstructure; Dealer market; Trading network; Transparency (search for similar items in EconPapers)
JEL-codes: G10 G18 G23 G24 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (32)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:130:y:2018:i:2:p:308-326

DOI: 10.1016/j.jfineco.2018.06.009

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