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DEBT IPO WAVES, INVESTOR SENTIMENT, MARKET CONDITIONS, AND ISSUE QUALITY

Authors


  • We would like to thank the editor, Scott Hein, and particularly the associate editor, Andrea Heuson, and the referee, Ryan Bubley, for their valuable comments and suggestions. We would also thank the participants at 2012 Southern Finance Association meetings, 2013 Midwest Finance Association meetings, and Nankai University. All errors are ours.

Abstract

We examine the aggregate volume of straight debt initial public offerings (DIPOs) from 1970 to 2010. We find that aggregate DIPO activities display wave patterns. Both the number and total proceeds of DIPOs vary substantially over time. DIPO volume is significantly associated with yield spread, aggregate book-to-market ratio, stock return volatility, lagged equity IPO volume, and term spread, suggesting that investor sentiment and capital market conditions play significant roles in explaining time variations in DIPO volume. We also find that speculative-grade DIPO issues synchronize with the business cycles, while investment-grade issues display a steady or countercyclical pattern.

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