VGSF - WU Vienna - LC

Stanislava Nikolova, University of Nebraska-Lincoln, N College of Business

Campus WU D3.0.225 11:00 - 12:15

Organizer VGSF

As part of the ser­ies of the "Fin­ance Re­search Sem­inar", VGSF wel­comes Stan­islava Niko­lova from the Uni­versity of Neb­raska-Lin­coln, N Col­lege of Busi­ness to present her re­search pa­per.
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Pa­per

Cor­por­ate bond flip­ping

In this pa­per we provide the first em­pir­ical evid­ence on flip­ping activ­ity in the cor­por­ate bond mar­ket. Ana­lyz­ing in­surer trades in cor­por­ate bonds dur­ing 2002–2018, we show that of­fer­ings with worse after­mar­ket per­form­ance are flipped less. When flip­ping their al­loc­a­tion in an of­fer­ing, in­surers tend to avoid selling to the of­fer­ing's un­der­writers even though un­der­writers of­fer bet­ter prices. The sens­it­iv­ity of flip­ping to after­mar­ket per­form­ance is broadly sim­ilar when flip­ping to un­der­writers than non-un­der­writers, which sug­gests that un­der­writers dis­cour­age flip­ping in both over­priced and un­der­priced of­fer­ings. In­surers that flip their al­loc­a­tion to un­der­writers re­ceive less prof­it­able al­loc­a­tions in these un­der­writers' sub­sequent of­fer­ings. Over­all, our find­ings sug­gest that the re­peated game nature of the is­su­ance pro­cess al­lows un­der­writers to par­tially limit flip­ping by us­ing their al­loc­a­tion dis­cre­tion to pen­al­ize flip­pers.



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