PI: Professor Raghavendra Rau (CJBS)
Project Title: Initial Public Debt Offerings
Project Summary: We analyze a sample of firms that choose to tap the public debt markets before the public equity markets. These “debt first” firms,which have typically never been analyzed in the prior literature, are more likely to be sponsor backed, are significantly larger on average and less likely to have information asymmetry problems than traditional “equity‐first” firms in the same industry and year. Their debt issues are more expensive and face more restrictive covenants than debt issues by publicly listed firms that tap the debt market for the first time. However, when the debt‐first firms eventually go public, they face lower underpricing than firms without public debt that undertake an initial public offering in the same industry. Our results document the importance of ownership structure in additional to traditional capital structure theories in the initial capital structure decisions of firms.
Project Period: 1.9.2013-30.9.2014
Extended till: 30.09.2015