Review of Finance Vol. 20 No. 1 2016

Bondholder Concentration and Credit Risk: Evidence from a Natural Experiment

Alberto Manconi¹; Massimo Massa²; Lei Zhang³

¹ 1 Tilburg University · ² 2 INSEAD, and · ³ 3 Nanyang Technological University

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.

DOI

10.1093/rof/rfv010

Volume

20

Issue

1

Pages

127-159

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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