The Review of Asset Pricing Studies Vol. 12 No. 3 2022
Inventory-Constrained Underwriters and Corporate Bond Offerings
open access
Abstract
We empirically study how inventory constraints of underwriters affect corporate bond offerings. Using underwriter-insurer-level transaction data, 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 preexisting 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’ bond financing costs.
- DOI
- 10.1093/rapstu/raab030
- Volume
- 12
- Issue
- 3
- Pages
- 639-666
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref