This article reports the results of an experiment designed to assess the impact of last-sale trade reporting on the liquidity of BBB corporate bonds. Overall, adding transparency has either a neutral or a positive effect on liquidity. Increased transparency is not associated with greater trading volume. Except for very large trades, spreads on newly transparent bonds decline relative to bonds that experience no transparency change. However, we find no effect on spreads for very infrequently traded bonds. The observed decrease in transaction costs is consistent with investors' ability to negotiate better terms of trade once they have access to broader bond-pricing data. (JEL codes: G14, G18, G23, G24, G28) Although larger than the market for US Government or municipal bonds, the corporate bond market historically has been one of the least transparent securities markets in the United States, with neither pretrade nor posttrade transparency. Corporate bonds trade primarily over-the-counter , and until recently, no centralized mechanism existed to collect and disseminate posttransaction information. This structure changed on July 1, 2002, when the National Association of Securities Dealers (NASD) began a program of increased posttrade transparency for corporate bonds, known as the Trade Reporting and Compliance Engine (TRACE) system. As part of this structural change, only a selected subset of bonds initially was subject to public dissemination of trade information. The resulting experiment enables us to observe the effects of increased posttrade transparency on market liquidity in a controlled setting.
This paper examines whether, and how, leveraged buyouts from the most recent wave of public to private transactions created value. For a sample of 192 buyouts completed between 1990 and 2006, we show that these deals are somewhat more conservatively priced and lower levered than their predecessors from the 1980s. For the subsample of deals with post-buyout data available, median market adjusted returns to pre-and post-buyout capital invested are 78% and 36%, respectively. In contrast, gains in operating performance are either comparable to or slightly exceed those observed for benchmark firms. We examine the relative contribution of several potential determinants of returns; in addition to gains in operating performance, returns are strongly related to increases in industry valuation multiples. Overall, our results provide insights into how transactions from the most recent wave of leveraged buyouts created value.
This article examines the performance of 197 public companies that emerged from Chapter 11. Over 40 percent of the sample firms continue to experience operating losses in the three years following bankruptcy; 32 percent reenter bankruptcy or privately restructure their debt. The continued involvement of prebankruptcy management in the restructuring process is strongly associated with poor post‐bankruptcy performance. The substantial number of firms emerging from Chapter 11 that are not viable or need further restructuring provides little evidence that the process effectively rehabilitates distressed firms and is consistent with the view that there are economically important biases toward continuation of unprofitable firms.
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