Do Banks Strategically Time Public Bond Issuance Because of Accompanying Disclosure, Due Diligence, and Investor Scrutiny?

56 Pages Posted: 24 Sep 2003

See all articles by Daniel M. Covitz

Daniel M. Covitz

Board of Governors of the Federal Reserve System

Paul Harrison

Federal Reserve Board - Division of Research & Statistics

Date Written: July 2003

Abstract

This paper tests a new hypothesis that bank managers issue bonds, at least in part, to convey positive, private information and refrain from issuance to hide negative, private information. We find evidence for this hypothesis, using rating migrations, equity returns, bond issuance, and balance sheet data for US bank holding companies. The results add to our understanding of the role of "market discipline" in monitoring bank holding companies and also inform upon how proposed regulatory requirements that banking organizations frequently issue public bonds might augment "market discipline."

Keywords: Bond Issuance, disclosure, due diligence, financial institutions

JEL Classification: G21, G28, G32, G31

Suggested Citation

Covitz, Daniel M. and Harrison, Paul, Do Banks Strategically Time Public Bond Issuance Because of Accompanying Disclosure, Due Diligence, and Investor Scrutiny? (July 2003). Available at SSRN: https://ssrn.com/abstract=436804 or http://dx.doi.org/10.2139/ssrn.436804

Daniel M. Covitz (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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Paul Harrison

Federal Reserve Board - Division of Research & Statistics ( email )

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202-452-3637 (Phone)
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