The Unintended Consequences of Corporate Bond ETFs: Evidence from the Taper Tantrum

Dannhauser, Caitlin D; Hoseinzade, Saeid

doi:10.1093/rfs/hhab031

Cited by 28 publications

(3 citation statements)

References 51 publications

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“…Moreover, we conduct the main analyses with net profit margin as an alternative proxy for firm performance and also use the natural logarithm of our ETFs concentration measures. To address that Vanguard ETFs are share classes of the index fund, we identify 38 Vanguard ETFs in our sample and reconstruct our ETFs concentration measures excluding those Vanguard ETFs in a similar way to Elton et al (2019) and Dannhauser and Hoseinzade (2022). Our original results remain robust in all these cases.…”

Section: Resultsmentioning

confidence: 99%

Engaged ETFs and firm performance

El Kalak,

Hudson,

Tosun

2023

Euro Fin Management

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Exchange Traded Funds (ETFs) have often tracked indices and charged low fees so their incentives to improve firm performance are questionable although little empirical work has investigated this issue. Theoretically, however, we expect firms to perform better when held by more engaged ETFs. We develop a new measure of engagement using a weighted‐average concentration measure which captures the combined effect of the concentration of the portfolios of the ETFs investing in a firm and the ownership of the firm by those ETFs. Using ETFs' investment in US‐listed firms for the period 2000–2019, we confirm our expectations that more engaged ETFs improve firm performance.

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Section: Resultsmentioning

confidence: 99%

Engaged ETFs and firm performance

El Kalak,

Hudson,

Tosun

2023

Euro Fin Management

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“…Hamm (2014) finds that ETFs can deteriorate liquidity for their investees. C. Dannhauser and Hoseinzade (2021) find that the unique features of corporate bond ETFs, that is, in‐kind creation and redemption mechanisms and the exacerbation of the liquidity mismatch in periods of stress, that heighten the extent of liquidity transformation are a unique source of fragility for corporate bond markets.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

ETF ownership and corporate cash holdings

Kalak

Tosun

2022

Euro Fin Management

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Do exchange-traded funds (ETFs) influence corporate cash holding decisions? Consistent with reduced managerial learning from the stock market and increased uncertainty due to higher ETF ownership, we show that firms included in ETF baskets have higher cash holdings as a precautionary response. We address endogeneity concerns through different natural experiments, namely, the reconstitution of the Russell 1000/2000 index and BlackRock's acquisition of iShares. We identify changes in revenue, external financing, share repurchases and net working capital as potential channels through which cash holdings increase due to higher ETF ownership, with cash holdings increases having a positive impact on firm value.

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“…Hamm (2014) finds that ETFs can deteriorate liquidity for their investees. C. Dannhauser and Hoseinzade (2021) find that the unique features of corporate bond ETFs, that is, in-kind creation and redemption mechanisms and the exacerbation of the liquidity mismatch in periods of stress, that heighten the extent of liquidity transformation are a unique source of fragility for corporate bond markets.…”

Section: Hypothesis Developmentmentioning

confidence: 99%