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Issuance Overpricing of China’s Corporate Debt Securities

Author

Listed:
  • Yi Ding

    (Chinese University of Hong Kong)

  • Wei Xiong

    (Princeton University and NBER)

  • Jinfan Zhang

    (Chinese University of Hong Kong)

Abstract

We document issuance overpricing of corporate debt securities in China, which contrasts with underpricing of equity and debt securities in Western countries. The phenomenon in China is robust across subsamples of issuances with different credit ratings, maturities, issuer types, and issuing history, reflecting the distinct institutional environment and issuance process in China’s market for corporate debt securities. 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.

Suggested Citation

  • Yi Ding & Wei Xiong & Jinfan Zhang, 2021. "Issuance Overpricing of China’s Corporate Debt Securities," Working Papers 2021-50, Princeton University. Economics Department..
    • Handle: RePEc:pri:econom:2021-50
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    File URL: http://wxiong.mycpanel.princeton.edu/papers/Overpricing.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Overpricing; New Issues; Corporate Debt Securities; Chinese Market;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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