This paper examines the information contents of trading activities in the corporate bond market prior to earnings announcements. We find that the direction of pre-announcement bond trading is significantly related to earnings surprises. Such linkage is most evident prior to negative news and in...

Taking advantage of recently augmented corporate bond transaction data, we examine the pricing implications of informed trading in corporate bonds and its ability to predict corporate defaults. We find that microstructure measures of information asymmetry seem to capture adverse selection in...

We investigate a prominent allegation in Congressional hearings that Moody's loosened its standards for assigning credit ratings after it went public in the year 2000 in an attempt to chase market share and increase revenue. We exploit a difference-in-difference design by benchmarking Moody's...

Liquidity restrictions on investors, like the redemption gates and liquidity fees introduced in the 2016 money market fund (MMF) reform, are meant to improve financial stability during crises. However, we find evidence that they might have exacerbated the run on prime MMFs during the Covid-19...

Technology transformed the trading of financial assets but has been slower to come to corporate bond trading. Combining proprietary data from MarketAxess with regulatory TRACE data, we investigate how electronic request for quote (RFQ) trading affects bond dealers and trading more generally. We...

We provide the first direct analysis of how dealers' funding liquidity affects their liquidity provision in securities markets. Dealers' repo trading terms, including both haircuts and repo spreads, and their ability to finance their bond inventories through repos affect their bid-ask spreads...

Focusing on downgrades as stress events that drive the selling of corporate bonds, we document that the illiquidity of stressed bonds has increased after the Volcker Rule. Dealers regulated by the Rule have decreased their market-making activities while non-Volcker-affected dealers have not...

Insurance companies often follow highly correlated investment strategies. As major investors in corporate bonds, their investment commonalities subject investors to fire-sale risk when regulatory restrictions prompt widespread divestment of a bond following a rating downgrade. Reflective of...

This paper investigates execution quality issues in corporate bond trading. Using an extensive sample of bond trades by insurance companies, we find that an insurance company entering a trade of similar size and on the same side for the same bond on the same day with the same dealer will receive...

While credit default swaps (CDS) can be used to hedge credit risk exposures or to speculate, we examine another use of them: banks buy CDS referencing their borrowers to obtain regulatory capital relief. Such capital relief activities have unintended consequences, as banks extend riskier loans...