Overpricing of new issues in the Japanese straight bond market

摘要

It has been suggested that newly issued corporate straight bond yields in Japan are set lower than equilibrium yields; that is, new issues tend to be overpriced. This study examines the overpricing of straight bonds using data on new issues between April 1995 and March 2000. The results indicate that issuing yields are indeed lower than aftermarket equilibrium yields. This is especially the case for issues with a smaller number of underwriters, and periods when fewer securities companies have experience as the lead managing underwriter. The findings also suggest that this effect is more pronounced for issues with ratings between AAA and A-, and less so for those with ratings between BBB+ and BBB-.