Bond Market Entry Around the World

In contrast to equity IPOs, relatively little is known about firms' entries into bond markets. I examine bond initial public offerings (bond IPOs) around the world and find that firm and issue characteristics differ markedly across continents. European entrants are larger, older and pay more dividends than those in the US. Latin American and Asian firms do smaller issues, both absolutely and relative to firm size. On average, stock price reactions to bond IPO announcements do not differ significantly from zero. The variance is very high however. Consistent with the view of debt and dividends being alternative disciplining mechanisms, announcement effects are strongly negatively related to dividend levels. This relation is even stronger when shareholder rights are limited, suggesting that these devices are more important in countries with weak investor protection. For more information: contact Peter Roosenboom (proosenboom@rsm.nl)