Online seminar – The real effects of credit supply: Evidence from upsized corporate bond offerings

Edith Hotchkiss, Professor of Finance, Carroll School of Management at Boston College

This paper studies how strong realisations of investor demand (ie, credit supply) affect firms’ capital structure and investment decisions. Issuers frequently increase (“upsize”) bond offering amounts when the underwriters’ “book” is oversubscribed, delivering a significant increase in the dollar proceeds to the issuing firm. We show that upsizing captures both time-series variation in credit market conditions and cross-sectional differences that drive firms’ decision to upsize the offering. Firms use proceeds from upsized offerings to reduce bank debt and increase cash holdings, and increases in leverage are temporary. Among high yield issuers, only those with higher growth opportunities use the additional proceeds to increase investment. Our issuer-level evidence suggests these favorable realisations of credit supply impact corporate behavior but are not associated with excessive leverage or overinvestment for firms with the greatest risk of default.

Speaker bio

Edith Hotchkiss is a Professor of Finance at the Carroll School of Management at Boston College. Her research focuses on various aspects of US corporate debt markets, and particularly on the efficiency of the Chapter 11 process. In addition to publications in peer reviewed academic journals, Professor Hotchkiss has authored several book chapters on the bankruptcy process, and coauthored the text “Corporate Financial Distress, Restructuring and Bankruptcy” (Wiley Finance, 2019). She has served on the national board of the Turnaround Management Association, and as an independent advisor to FINRA on issues related to corporate bond market trading and transparency. Dr Hotchkiss received her PhD in Finance from the Stern School of Business at New York University and her BA from Dartmouth College. Prior to entering academics, she worked in consulting and for the Financial Institutions Group of Standard & Poor’s Corporation.

To join the seminar, register and join the Zoom meeting and enter the meeting ID.

Meeting ID: 868 6554 9117
Password: 437175

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