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| Author: | Ellul, A. Jotikasthira, C. Lundblad, C. T. |
| Title: | Regulatory pressure and fire sales in the corporate bond market |
| Journal: | Journal of Financial Economics
2011 : SEP, VOL.101:3, p. 596-620 |
| Index terms: | sales methods regulations prices liquidity insurance companies corporate finance bond markets |
| Freeterms: | transaction data fire sales pressure |
| Language: | eng |
| Abstract: | This article analyzes and investigates fire sales of downgraded corporate bonds induced by regulatory constraints imposed on insurance companies. It is used insurance company transaction data and found that insurance companies that are relatively more constrained by regulation are more likely to sell downgraded bonds. Bonds subject to a high probability of regulatory-induced selling exhibit price declines and subsequent reversals. These price effects appear larger during periods when the insurance industry is relatively distressed and other potential buyers' capital is scarce. |
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