We explore the bond “clustering” phenomenon, using a sample of bond issuances in 2000–2015. Bond “clustering” is when the number of bonds issued that year exceeds three standard deviations above the mean number of issues for the firm over the sample period. We examine why firms opt for multiple issuances instead of a large one: exhaustion of debt capacity, refunding existing debt, timing favorable market conditions, managing working capital or financing profitable investment opportunities. Results indicate that firms do not cluster due to simply refinancing outstanding debt, but in order to manage their liquidity position and short-tern cash needs, to take advantage of the low interest rates, and to finance profitable investment. Bonds yields and corporate governance are related. Corporate governance aims to encourage management of the firm to work in shareholders’ best interests, which results in an inherent agency conflict between bondholders and managers, who represent shareholders.
We examine if the firms’ corporate governance impacts new issues covenants. We find weak evidence of firms with corporate governance mechanisms that protect bondholders from excessive shareholder/manager risk-taking issuing bonds with fewer restrictive covenants (restrictive covenants indicate strong “bondholder governance” as defined by Cremers, Nair, and Wei (2007)), though they do not accrue benefits sufficient enough to lower yields on new issues.
Using the financial crisis and the subsequent tightening of regulatory oversight over CRA industry, we investigate the changing influence of credit ratings updates and credit watch procedure on market reactions to credit downgrades pre- and post- the 2008 financial crisis, and the July, 2010 Dodd-Frank Act. Market reactions to credit ratings downgrades and to downgrade credit watch initiation become less pronounced in the post-crisis post- Dodd-Frank environment.
|Advisor:||Fuller, Kathleen P.|
|Commitee:||Ammetter, Anthony, Lynch, Andrew, Van Ness, Bonnie F.|
|School:||The University of Mississippi|
|School Location:||United States -- Mississippi|
|Source:||DAI-A 80/07(E), Dissertation Abstracts International|
|Keywords:||Bond issuance, Credit ratings, Leverage, Trading activity|
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