Efficiency and sustainability of bond market: Evidence from aftermarket trading of US corporate bond offerings

Lisa Yang and Jeremy C. Goh

Pacific-Basin Finance Journal, 2024, vol. 85, issue C

Abstract: We find that for bond offerings that are non-self-marketed, there is a significantly larger proportion of institutional-sized sell trades than buy. In stark contrast, for self-marketed offerings by underwriters, immediate post-offer trading is characterized by a larger proportion of institutional-sized buy trades than sell. We also find evidence suggesting that retail investors, who are initially shut out of the offering deals, buy bonds in the secondary market at a higher price. Our evidence suggests that certain institutional investors receiving allocations of non-self-marketed offerings flip them for a quick profit. The systematic disparity in aftermarket trading immediately following self-marketed versus non-self-marketed bond offerings suggests that the offering process is inefficient, which may have implications on the sustainability of bond offering process.

Keywords: Corporate bond offerings; Flipping; Agency problem (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:85:y:2024:i:c:s0927538x24001367

DOI: 10.1016/j.pacfin.2024.102385

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