Author: Keh-Chian ChangPublisher:
ISBN:
Category : Bondholders
Languages : en
Pages : 86
Book Description
Essay I: Institutional Bond Ownership and Financial Misconduct The first essay examines the role of institutional bondholders in reduction of the likelihood of financial misconduct. After controlling for a wide range of firm characteristics, we find firms that have greater institutional bond ownership reduce the likelihood of financial misreporting that eventually leads to class action litigation. In addition, relatively higher ownership by insurance companies decreases the likelihood of financial misconduct. We document consistent results using SEC enforcement actions as our second proxy for financial misrepresentation. The results suggest the potential and undocumented monitoring role of institutional bond investors. Essay II: Firm Visibility and Corporate Bond Liquidity The second essay examines the impact of firm visibility on bond liquidity. Using a range of visibility measures such as firm size, advertising expenses, breadth of stock and bond ownerships, and analyst coverage, we find strong evidence that visibility positively impacts bond liquidity. Our result is robust to alternative measures of liquidity and different estimation methodologies, and holds for bonds in all rating categories. To further prove the direct link between firm visibility and bond liquidity, we examine liquidity changes in bonds upon their issuing firms being added to the S & P 500 index, an exogenous visibility increasing event. We find a significant increase in bond liquidity relative to a control group after the index inclusion.