Abstract
In comparison to bank financing, public debt market may allow firms to more readily match maturity and risk structures between their assets and liabilities. We test whether new issuers on the European corporate bond markets experience a change in their interest rate sensitivity upon their bond issuance. We find that stock returns have become significantly less sensitive to interest rate fluctuations for firms that enter the publicly traded bond market. Our findings support the notion that firms manage their interest rate risk with new debt issues.
| Original language | English |
|---|---|
| Pages (from-to) | 1-11 |
| Number of pages | 11 |
| Journal | Journal of Financial Stability |
| Volume | 36 |
| DOIs | |
| Publication status | Published - 1 Jun 2018 |
| MoE publication type | A1 Journal article-refereed |
Funding
We wish to thank Vikas Agarwal, Jan Antell, Bo Becker, Jess Cornaggia, Mike Faulkender, Iftekhar Hasan (editor), Esa Jokivuolle, Markku Kaustia, Lars Norden, James Vickery and anonymous referees seminar participants at the 2011 INFINITI conference in Dublin, Ireland and the 2012 FMA Meetings for helpful comments and suggestions. We also thank Annika Syrjänen for excellent research assistance. Financial support from the OP Pohjola Foundation is gratefully acknowledged.
Keywords
- Euro
- Interest rate risk
- Risk management
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