Regulatory Pressure and Fire Sales in the Corporate Bond Market

@inproceedings{Ellul2010RegulatoryPA,
  title={Regulatory Pressure and Fire Sales in the Corporate Bond Market},
  author={Andrew Ellul and Chotibhak Jotikasthira and Christian T. Lundblad},
  year={2010}
}
This paper investigates fire sales of downgraded corporate bonds induced by regulatory constraints imposed on insurance companies. Regulations either prohibit or impose large capital requirements on the holdings of speculative-grade bonds. As insurance companies hold over one third of all outstanding investment-grade corporate bonds, the collective need to divest downgraded issues may be limited by a scarcity of counterparties and associated bargaining power. Using insurance company transaction… CONTINUE READING
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