Lifting the veil: The price formation of corporate bond offerings

Liying Wang

Journal of Financial Economics, 2021, vol. 142, issue 3, 1340-1358

Abstract: Using newly available data on initial prices, this study is the first to analyze the price-updating process associated with corporate bond (CB) offerings. Similar to the case for equity IPOs, the evidence shows bookbuilding theories help explain the CB offering price. In particular, CB price updates reduce underwriters’ pricing errors. The partial adjustment phenomenon exists, and underwriters propose a lower initial price in cases of greater uncertainty. However, the CB price update has a large mean value and is smaller for lower-rated offerings, indicating part of the CB price update is unrelated to investors’ information production.

Keywords: Corporate bond; Bookbuilding; Price update; Underpricing; Partial adjustment phenomenon (search for similar items in EconPapers)
JEL-codes: G12 G14 G24 G32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:142:y:2021:i:3:p:1340-1358

DOI: 10.1016/j.jfineco.2021.06.037

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