The Shelf Registration of Debt and Self Selection Bias

Abstract

Prior studies report lower issue costs for shelf registered debt and conclude that the benefits of increased underwriter competition can be realized by those firms using this registration procedure. This study re‐examines the purported superiority of issuing debt via shelf registration, and finds that the savings in issue costs displayed by earlier studies can be attributed to a self selection bias and not the method of registration.

Split Ratings, Bond Yields, and Underwriter Spreads

“…The importance of issue size, bond ratings, and various indenture provisions in determining bond yields and underwriter spreads is well documented in the literature (e.g., Allen, Lamy, Thompson (1990), Ederington (1975), Fisher (1959), Livingston, Pratt, and Mann (1995), Mitchell (1991), Sorensen (1979)). Issue duration and convexity are hypothesized to influence Treasury spreads and underwriter spreads; therefore, they are included in the specification as control variables.…”

Make-whole call provisions: A case of “much ado about nothing?”

“…Specifically, a low ESTVOL (higher transparency) should be related to high CFACCURACY (less potential managerial manipulation). 29 For example, see Allen, Lamy and Thompson (1990), Blackwell, Marr, and Spivey (1990), and Sherman (1999). 30 We also attempted to include several other measures suggested by the literature.…”

Earnings Predictability, Bond Ratings, and Bond Yields

“…Similar to the work of Ederington, Yawitz and Roberts (1987), Lamy and Thompson (1988), and Allen, Lamy and Thompson (1990) we represent the bond ratings as a series of binary indicator variables. This method of incorporating bond ratings into the bond yield model allows for unequal risk premiums across rating classes, i.e.…”