ERIM Research Seminar in Financial Management: Frequent Bond Issuers and the Firm-Specific Yield Curve



In this paper we investigate whether frequent bond issuers enjoy cost advantages over less frequent issuers. We find that frequent issuers do indeed have lower at-issue yield spreads over benchmark. This result also holds after controlling for ratings, capital structure, and other firm and issue characteristics that typically explain the spread over benchmark. We then explore this cost advantage further and find that it is not explained by superior timing. Having and building a firm-specific yield curve does prove to reduce the cost of bond financing. However, even after correcting for the firm-specific yield curve, frequent issuers still enjoy a cost advantage. We interpret this residual as a reputation effect.


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Peter Roosenboom