Bondholder Concentration and Credit Risk: Evidence from a Natural Experiment

Alberto Manconi (), Massimo Massa and Lei Zhang

Review of Finance, 2016, vol. 20, issue 1, 127-159

Abstract: We exploit the impact of hurricane Katrina on insurance companies to study the relationship between bondholder concentration and credit risk. Redemption-driven sales by property and casualty (re)insurance companies exposed to hurricane Katrina are associated with a large drop in bondholder concentration faced by corporate bond issuers. Exploiting this shock to capture exogenous variation in bondholder concentration, we find that greater bondholder concentration is associated with higher bond yield spreads, as well as with firm characteristics associated with credit risk.

Date: 2016
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