We empirically study how inventory constraints of underwriters affect corporate bond offerings. Using transaction data at the underwriter-insurer level, we find that a more constrained underwriter is more likely to place a bond and increases the allocation in the primary market to an insurer with a stronger pre-existing relationship. The same underwriter is also more likely to buy back part of an allocation from the same insurer within 6 to 12 months after an offering. Overall, by parking inventory to relationship investors in the primary market, underwriters mitigate the effect of their inventory constraints on firms' costs of bond financing.

Inventory-constrained underwriters and corporate bond offerings

Nagler, Florian
;
2022

Abstract

We empirically study how inventory constraints of underwriters affect corporate bond offerings. Using transaction data at the underwriter-insurer level, we find that a more constrained underwriter is more likely to place a bond and increases the allocation in the primary market to an insurer with a stronger pre-existing relationship. The same underwriter is also more likely to buy back part of an allocation from the same insurer within 6 to 12 months after an offering. Overall, by parking inventory to relationship investors in the primary market, underwriters mitigate the effect of their inventory constraints on firms' costs of bond financing.
2022
2022
Nagler, Florian; Ottonello, Giorgio
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/4041944
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