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Refinancing Risk, Liquidity and the Underpricing of Newly Issued Bonds

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  • Ju Hyun Kim
  • Heungju Park
  • Kyojik Song

Abstract

This study examines the effect of refinancing risk and liquidity of bond offering firms on the underpricing of their seasoned corporate issues. Using a sample of 8697 U.S. seasoned corporate bond offerings during 2002–2023, we find that refinancing risk increases the initial returns of corporate bond offerings, while liquidity preceding the bond offering date decreases the underpricing of corporate bonds. The underpricing of bond issues from illiquid issuers is most pronounced for firms with higher refinancing risk, highlighting the importance of secondary market bond liquidity in decreasing the cost of debt capital for constrained firms.

Suggested Citation

  • Ju Hyun Kim & Heungju Park & Kyojik Song, 2025. "Refinancing Risk, Liquidity and the Underpricing of Newly Issued Bonds," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 65(4), pages 3428-3449, December.
    • Handle: RePEc:bla:acctfi:v:65:y:2025:i:4:p:3428-3449
    DOI: 10.1111/acfi.70048
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