Issuance overpricing of China's corporate debt securities

Yi Ding, Wei Xiong and Jinfan Zhang

Journal of Financial Economics, 2022, vol. 144, issue 1, 328-346

Abstract: We document issuance overpricing of corporate debt securities in China, which is robust across subsamples with different credit ratings, maturities, and issuers. This phenomenon contrasts with underpricing of equity and debt securities in Western countries and reflects China's distinct institutional environment. The average overpricing dropped from 7.44 basis points to 2.41 basis points after the government prohibited underwriters from using rebates in issuances in October 2017. By analyzing overpricing before and after the rebate ban and across different issuers and underwriters, we uncover two channels for underwriters, who compete for future underwriting business, to drive up overpricing: rebates and self-purchases.

Keywords: Overpricing; New issues; Corporate debt securities; Chinese market (search for similar items in EconPapers)
JEL-codes: G12 G14 G24 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:144:y:2022:i:1:p:328-346

DOI: 10.1016/j.jfineco.2021.06.010

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