Abstract
I explore the timing strategies for bond issuances based on disclosures of CEO inside debt by using hand-collected data of 5,775 U.S. public companies from 2006 to 2017. During the months before proxy statement releases, new changes in CEO inside debt are private information to companies' insiders. Companies can exploit this information asymmetry to issue bonds when the market, based on publicly available information of inside debt, perceives these companies' debt agency problems as relatively insignificant. I find that companies cluster their bond offerings in the immediate quarters after (before) disclosures of positive (negative) inside debt changes. The tendencies to time bond issuances based on inside debt disclosures also increase with the magnitudes of the disclosed changes. In addition, the adoption of these timing strategies is more observable when the issuing firms are regular issuers or when the new issues do not include covenants, especially the debt-restriction covenants. Finally, I verify that these timing strategies help reduce the cost of borrowing, as the bonds issued at favorable times, i.e. right after positive disclosures or before negative disclosures, have lower offering yield spreads than those issued at non-favorable times.
Published Version
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