Research Papers

Bond Ownership Concentration, Job Market Paper



Institutional ownership of corporate bonds is highly concentrated. The largest five bondholders hold at least 40.4% of the amount outstanding of the average bond issue, making the bond market more concentrated than equities. Consistent with information acquisition costs, I document that bond ownership concentration increases with credit risk, but mostly among high-yield bonds, as investment-grade bonds are information insensitive. Conditional on credit risk, bond concentration decreases with firm transparency, but mostly among high-yield firms. To address endogeneity concerns, I find similar results when considering TRACE dissemination of historical bond trades as an exogenous shock to information acquisition costs. Borrowers with a concentrated investor base suffer from a higher cost of borrowing even after controlling for liquidity and credit risk. One standard deviation increase in pre-issuance bond concentration is associated with a 6 to 13 basis point increase in yield spread, translating to an extra cost of $2.5 million to $5.2 million for the median bond issuance.

Strategic Behavior Surrounding Sales of Mutual-Fund Management Companies, 

with Zoran Ivković (Michigan State University) and Andrei Simonov (Michigan State University), MSU working paper

SSRN    Paper


Predictable fund performance patterns surrounding mutual-fund management company sales suggest joint and strategic fund performance management. Consistent with a simple model we develop, return patterns in the period leading to the sale point to a decline in the cross-subsidization of star performers and an increase in the cross-subsidization of dud performers. The return patterns are more pronounced among funds with higher flow-performance sensitivity and fund management companies that engage in cross-trades. This paper is the first to document the event-driven dynamic nature of strategic cross-subsidization in the mutual-fund industry.

Evolution of Debt Financing toward Less-Regulated Financial Intermediaries in the United States,

with Isil Erel (The Ohio State University), Journal of Financial and Quantitative Analysis, forthcoming

NBER   SSRN    Paper


Nonbank lenders have been playing an increasing role in supplying debt, especially after the Great Recession. How important are the distortions in the greater regulation of banks that differentially limit risk-taking across alternative providers of credit? How might the growing role of nonbanks in credit markets affect financial stability? This selective review addresses these questions and discusses how banks and nonbanks helped provide liquidity to the nonfinancial sector during the COVID-19 pandemic shock. We argue that tighter bank regulation has created incentives for nonbanks to increase their participation in credit markets, a trend that creates concerns about financial stability.