Issuance overpricing of China's corporate debt securities

Yi Ding, Wei Xiong, Jinfan Zhang

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

We document issuance overpricing of corporate debt securities in China, which is robust across subsamples with different credit ratings, maturities, and issuers. This phenomenon contrasts with underpricing of equity and debt securities in Western countries and reflects China's distinct institutional environment. The average overpricing dropped from 7.44 basis points to 2.41 basis points after the government prohibited underwriters from using rebates in issuances in October 2017. By analyzing overpricing before and after the rebate ban and across different issuers and underwriters, we uncover two channels for underwriters, who compete for future underwriting business, to drive up overpricing: rebates and self-purchases.

Original languageEnglish (US)
JournalJournal of Financial Economics
DOIs
StateAccepted/In press - 2021

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management

Keywords

  • Chinese market
  • Corporate debt securities
  • New issues
  • Overpricing

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