Home bias and the need to build a bond market track record

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Krebbers, Arthur and Marshall, Andrew and McColgan, Patrick and Neupane, Biwesh (2022) Home bias and the need to build a bond market track record. European Journal of Finance, 28 (18). pp. 1803-1818. ISSN 1351-847X (https://doi.org/10.1080/1351847X.2021.2007149)

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Abstract

This paper examines home bias in the primary distribution process of the European corporate bond market. Our approach allows us to study the initial holdings of corporate bonds at a uniquely liquid point in their life cycle. We find that home bias is prevalent across our sample, but is highest amongst bonds issued by firms from both the highest-debt market size economies and lower-debt market sizes economies, who both benefit from relatively large domestic bond markets compared to their funding needs. We argue that international diversification can occur in this market through a life cycle effect where issuers outgrow investor home bias and build a reputation amongst international investors through regular bond market issuance. Our results provide some initial support for this life cycle effect, with repeat issues, issues off an EMTN programme, and highly subscribed issues being associated with lower home bias.

ORCID iDs

Krebbers, Arthur, Marshall, Andrew ORCID logoORCID: https://orcid.org/0000-0001-7081-1296, McColgan, Patrick ORCID logoORCID: https://orcid.org/0000-0002-7980-6175 and Neupane, Biwesh ORCID logoORCID: https://orcid.org/0000-0001-7918-0259;
CORE (COnnecting REpositories)