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Receiving investors in the block market for corporate bonds

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  • Jacobsen, Stacey
  • Venkataraman, Kumar

Abstract

We study block trades in the corporate bond market, where dealers buy or sell blocks from initiating customers and offset their positions with receiving investors. Our findings indicate that while receivers benefit from trading cost savings, they primarily bear adverse selection costs and experience worse outcomes when informed trading is prevalent. Mandatory trade reporting improves receiver outcomes by revealing dealers’ private information, but the benefits are reduced when reporting is delayed. Our results emphasize the importance of transparency regime design and suggest potential market fragility: if information asymmetry becomes severe, receivers may withdraw from the block market.

Suggested Citation

  • Jacobsen, Stacey & Venkataraman, Kumar, 2025. "Receiving investors in the block market for corporate bonds," Journal of Financial Economics, Elsevier, vol. 170(C).
    • Handle: RePEc:eee:jfinec:v:170:y:2025:i:c:s0304405x25000698
    DOI: 10.1016/j.jfineco.2025.104061
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    More about this item

    Keywords

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    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
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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