HCBE Faculty Articles

Title

Corporate Bond Pricing and Ownership Heterogeneity

Document Type

Article

Date

2-2016

Publication Title

Journal of Corporate Finance

ISSN or ISBN

1872-6313

Volume

36

Issue

2016

First Page

54

Last Page

74

Description

We examine how heterogeneity in institutional equity ownership affects bondholders. Firms with larger short-term (long-term) institutional ownership are associated with higher (lower) future bond yield spreads. The adverse effect of short-term ownership on bond pricing is driven by issuing firms that have larger financial distress risk and larger equity volatility. The favorable effect of long-term ownership appears to be more systematic. Further, this bond pricing effect is stronger in cases where shareholder rights are relatively weak. Finally, the effect of short (long) horizons is driven by concentrated (diffused) institutional holdings.

DOI

10.1016/j.jcorpfin.2015.11.001

Peer Reviewed

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