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The Pricing of Initial Public Offers of Corporate Straight Debt

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  • Datta, Sudip
  • Iskandar-Datta, Mai
  • Patel, Ajay

Abstract

This study examines the initial-day and aftermarket price performance of corporate straight debt IPOs. The authors find that initial public offereings (IPOs) of speculative grade debt are underpriced like equity IPOs, while those rated investment grade are overpriced. IPOs of investment grade debt are typically issued by firms listed on the major exchanges and underwritten by prestigious underwriters. In contrast, junk bond IPOs are more likely to be handled by less prestigious underwriters and are typically issued by over-the-counter firms. The authors' analysis also reveals that bond rating, market listing of the firm, and investment banker quality are significant determinants of bond IPO returns. Copyright 1997 by American Finance Association.

Suggested Citation

  • Datta, Sudip & Iskandar-Datta, Mai & Patel, Ajay, 1997. "The Pricing of Initial Public Offers of Corporate Straight Debt," Journal of Finance, American Finance Association, vol. 52(1), pages 379-396, March.
    • Handle: RePEc:bla:jfinan:v:52:y:1997:i:1:p:379-96
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