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When less is not always more: Issue frequency and borrowing costs in commercial paper market

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  • Kamate, Vidya
  • Ranjan, Abhishek

Abstract

Despite being issued by sizable, financially sound corporations with strong ratings, commercial papers (CPs) exhibit significant yield differences, even among entities within the same rating bracket. We provide novel empirical evidence of an important factor that determines CP yields i.e. frequency of CP issuance. Using data on primary CP issues in India, we find that borrowing costs are significantly lower for each subsequent issue of a CP issuer. Consistent with asymmetric information channel, we find that yield premium for infrequent issues is higher in periods of heightened information asymmetry such as high equity market volatility and COVID-19 pandemic period.

Suggested Citation

  • Kamate, Vidya & Ranjan, Abhishek, 2025. "When less is not always more: Issue frequency and borrowing costs in commercial paper market," Economics Letters, Elsevier, vol. 254(C).
    • Handle: RePEc:eee:ecolet:v:254:y:2025:i:c:s0165176525002964
    DOI: 10.1016/j.econlet.2025.112459
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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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