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On the Determinants of Underpricing in Corporate Bond Offerings

Aronsson, Björn LU and Tano, Daniel LU (2016) NEKP03 20161
Department of Economics
Abstract
Money is often left on the table when corporations issue new securities. Explanations for the underpricing phenomenon are often related to information asymmetry between the investor and the issuer. In this study we investigate factors affecting underpricing on corporate bonds in the Swedish market. To some extent contrary to what was expected, the results indicate that bonds are on average overpriced. The study finds support for the riskiness of the bond and bookbuilding as determinants of underpricing. We find little support for the market level credit risk affecting underpricing, which leads us to believe that the market level credit risk might affect the type and frequency of issues rather than underpricing directly.
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author
Aronsson, Björn LU and Tano, Daniel LU
supervisor
organization
course
NEKP03 20161
year
type
H2 - Master's Degree (Two Years)
subject
keywords
Bond Underpricing, Underpricing, Initial Bond Offering, Swedish Bond Market, Credit Default Swap
language
English
id
8877267
date added to LUP
2016-06-13 13:14:18
date last changed
2016-06-13 13:14:18
@misc{8877267,
  abstract     = {Money is often left on the table when corporations issue new securities. Explanations for the underpricing phenomenon are often related to information asymmetry between the investor and the issuer. In this study we investigate factors affecting underpricing on corporate bonds in the Swedish market. To some extent contrary to what was expected, the results indicate that bonds are on average overpriced. The study finds support for the riskiness of the bond and bookbuilding as determinants of underpricing. We find little support for the market level credit risk affecting underpricing, which leads us to believe that the market level credit risk might affect the type and frequency of issues rather than underpricing directly.},
  author       = {Aronsson, Björn and Tano, Daniel},
  keyword      = {Bond Underpricing,Underpricing,Initial Bond Offering,Swedish Bond Market,Credit Default Swap},
  language     = {eng},
  note         = {Student Paper},
  title        = {On the Determinants of Underpricing in Corporate Bond Offerings},
  year         = {2016},
}