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Ride on Past? Evidence from Corporate Bond Offering Price Persistence

Haoyu Gao a

Ruixiang Jiang b

Chunchi Wu c

Xiaoguang Yang d

^aRenmin University of China, China

^bCity University of Hong Kong, Hong Kong

^cUniversity at Buffalo, USA. Corresponding email: chunchiw@buffalo.edu.

^dChinese Academy of Science, China

Advances in Pacific Basin Business, Economics and Finance

ISBN: 978-1-80043-871-2, eISBN: 978-1-80043-870-5

Publication date: 22 July 2021

Abstract

This chapter presents evidence of persistence in pricing new corporate bond issues. Both transition matrix and regression analyses show that cross-sectional differences in the yields of initial public bond offerings across issuers persist over time, and the persistence effect is stronger for firms with no rating changes, less frequent bond issuance, and higher information asymmetry. Our findings support the hypothesis of the “ride on past” behavior and confirm the value of information production accumulated from the past bond issuances for the pricing of newly issued bonds.

Keywords

Acknowledgements

Acknowledgment

Xiaoguang Yang acknowledges financial support from the research grant of the National Science Foundation of China (NSFC) (No. 70933003) and the 973 Program (2010CB731405).

Citation

Gao, H., Jiang, R., Wu, C. and Yang, X. (2021), "Ride on Past? Evidence from Corporate Bond Offering Price Persistence", Lee, C.-F. and Yu, M.-T. (Ed.) Advances in Pacific Basin Business, Economics and Finance (Advances in Pacific Basin Business, Economics and Finance, Vol. 9), Emerald Publishing Limited, Leeds, pp. 107-135. https://doi.org/10.1108/S2514-465020210000009004

Publisher

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Emerald Publishing Limited