Home bias and distribution of bond mandates - Evidence from international corporate bond market during 2008 financial crisis
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School of Business |
Master's thesis
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Authors
Date
2012
Department
Major/Subject
Finance
Rahoitus
Rahoitus
Mcode
Degree programme
Language
en
Pages
70
Series
Abstract
In this thesis I study how home bias varies over time in context of international corporate bond underwriting. I observe that home bias in bank’s country level underwriting portfolio increases by 27% on average when experiencing a crisis at its home market. The effect is limited to transparent and higher quality issuers, indicating homogeneous treatment of more opaque and lower credit quality issuers during crisis independent of their geographic origin. I also show that banks tend to withdraw to lesser extent from markets where underlying sovereign credit quality is higher than the one in their home market, suggesting that the shift is somewhat driven by flight to quality considerations. Moreover, I find that banks treat their relationship client firms equally during crisis regardless of their home origin. I also show that increase in home bias is positively correlated with geographical distance between the issuer and the underwriting bank. I find no evidence that the increase would be less severe when the underwriting bank shares common familiarity characteristics with the issuer.Description
Keywords
bond underwriting, home bias, financial markets, financial crisis, bank competition