Insider Trading in the Bond Market: Evidence from Loan Sale Events

摘要: We use the U.S. corporate loan and bond market to t est pricing implications of an informed investo r ‐ lender willingly renouncing some his in formational advantage by trading sharing sensitive information about borrower wi th market. argue show that sale he reduces adverse selection other publicl y traded assets firm (bonds). conjecture that, presence a flow between e lending arm financial conglomerate its investment arm, trades off benefits reducing exposure cost giving up s ome information. A sale, increasing market, informational affiliated asset managers who respond reduci ng their stake bonds whose loans are sold (“sold borrower”), independently considerations future va lue . The understands these incentives reacts positively sale. provide empirical support for our arguments showing yield spreads borrowers drop around further find informat ion asymmetry Around (a) reduce stakes i n borrowers, (b) liquidity improves (c) short-selling demand is reduced. Loan sales holding reductions not pre dictive bad conditions f irm.