Equity Market Reactions to Corporate Debt IPOs Job Market Paper

Bayesian econometrics of stock reactions to a firm’s first public debt offering

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Abstract. This chapter examines how equity investors respond to a firm’s first public debt offering (“Debt IPO”). We analyze stock price behavior around Debt IPO announcement periods. The Bayesian econometrics allows us to estimate abnormal returns and their uncertainty while incorporating information such as market conditions (e.g.S&P 500 returns, changes in the VIX) and firm characteristics (issue size, credit rating, industry). We find a statistically significant negative stock price reaction to corporate Debt IPO announcements. On average, equity holders experience a cumulative abnormal return of around –0.5%to –0.8% in the short event window, with losses accumulating to several percent over a one month post Debt IPO window. These negative abnormal returns remain robust after controlling for broader market movements and volatility. It suggests that the stock price decline is driven by the Debt IPO event itself rather than other coincident market shocks. The results suggest that investors view initial public debt offerings as a negative signal, possibly interpreting them as signals of increased leverage or limited growth prospects.

Corporate Debt IPO and Firm Growth: A Random Forest Approach with Sectoral Analysis Working Paper

Evidence from 1.5 million U.S. firm-year records, 1970–2024

Abstract. This paper investigates how corporate Debt IPOs affect firm subsequent asset growth using a dataset of 1.5 million U.S. firm bond issurance records from 1970 to 2024. I apply Random Forest analysis, using the principal amount raised at the debt IPO as the main treatment variable, and examine outcomes across financial and non-financial sectors. The results indicate a significant positive association between Debt IPO size(princial amount) and subsequent firm asset growth among non financial firms.