Capital supply and corporate bond issuances : evidence from mutual fund flows
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Date
2018-06-18
Authors
Zhu, Qifei
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Abstract
This dissertation examines how investment behavior of bond mutual funds affects corporate bond issuance decisions. Mutual funds that hold existing bonds of a company have a high propensity to acquire new bonds from the same firm. Therefore, capital flows to a firm's existing bondholders affects firm-specific capital supply. Companies with higher bondholder flow are more likely to issue bonds, while substituting away from equity financing and bank loans. These firms also enjoy lower bond financing costs. I find consistent results using Bill Gross' resignation as an exogenous shock to the capital supply of PIMCO's portfolio companies.