Bondholder Concentration and Credit Risk: Evidence from a Natural Experiment
Table C.II “Placebo” tests on alternative Atlantic hurricane seasons
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- Table C.II “Placebo” tests on alternative Atlantic hurricane seasons – cont’d
- 1998Q1-2007Q4 1999Q1-2007Q4 2000Q1-2007Q4 2001Q1-2007Q4
- B. Placebo indicators equal to 1 in Q3 and Q4 (issuer-seniority class level regressions) Sample period
- C. Placebo indicators equal to 1 in Q3 (issuer level regressions) Sample period
- D. Placebo indicators equal to 1 in Q3 and Q4 (issuer level regressions) Sample period
- Table C.III Bondholder concentration and yield spreads
Table C.II “Placebo” tests on alternative Atlantic hurricane seasons The table reports the estimates of a model: 
where H denotes bondholder concentration,  the component of bondholder concentration associated with property and casualty (re)insurance companies affected by hurricane Katrina, Kat is an indicator variable equal to 1 during the period 2005Q3 (in panels A and C) or 2005Q3-2005Q4 (in panels B and D), when hurricane Katrina takes place, and x is a set of control variables. The (re)insurance companies directly affected by hurricane Katrina are identified based on information from the Holborn Corporation (2005) report, as described in the text and in Appendix A. The control variables in x, whose coefficients have been omitted for convenient tabulation, include: Size, Leverage, Tobin’s q, the average log-Years to Maturity of the bonds, as well as industry (one-digit SIC code), rating, and calendar quarter indicators, and issuer-seniority level (issuer in Panels C and D) fixed effects. All variables are described in detail in Appendix B. Placebo is an indicator variable equal to 1 over periods other than the hurricane Katrina one isolated by Kat, so that its coefficient captures the average effect of on bondholder concentration H outside of the hurricane Katrina quarter. In panels A and C, it is equal to 1 each year in the third quarter. In panels B and D, it is equal to 1 each year in the third and fourth quarters. For convenient tabulation, only the coefficients on  and the two interaction terms  and  are reported in each panel. In panels A and B, the model is estimated at the issuer-seniority class level (i.e., each observation corresponds to a given issuer-seniority class in a given quarter). In panels C and D, the model is estimated at the issuer level (i.e., each observation corresponds to a given issuer in a given quarter), where both bondholder concentration H and its component due to Katrina-affected investors are equal-weighted averages of the corresponding issuer-seniority class level variables. Following Bertrand, Duflo, and Mullainathan (2004) and Petersen (2009) the t-statistics are based on standard errors clustered around issuer-seniority class in Panel A, and around issuers in Panel B. In each panel, in column (1) the model is estimated using all sample years; in column (2), using the sample years from 1999 onwards; in column (3), from 2000 onwards; and so on, until column (5), where it is estimated using the sample years from 2002, or three years prior to hurricane Katrina, onwards. The row labeled F test ( ) reports the F-test statistic for the null hypothesis that the coefficient  on the interaction term is equal to the coefficient  on . The sample consists of all the issuer-seniority class groups of bonds (issuers) in the Bank of America Merrill Lynch Corporate and High Yield Master Bond Index Database over the period between 1998Q1 and 2007Q4, excluding 24 bonds issued by (re)insurance companies affected by hurricane Katrina as described in Appendix A. To include a given bond in the sample, we require the availability of bond characteristics in the Mergent Fixed Income Securities Database (FISD) and firm characteristics in the Compustat Fundamentals quarterly database. The symbols *, **, and *** denote statistical significance at the 10%, 5%, and 1% levels.
Table C.II “Placebo” tests on alternative Atlantic hurricane seasons – cont’d
Table C.III Bondholder concentration and yield spreads The table reports the estimates of the model estimated on Table IV in the paper: 
where Y denotes the yield spread (based on the option-adjusted yield spread reported in the Bank of America Merrill Lynch Corporate and High Yield Master Bond Index Database), H is bondholder concentration, and x is a vector of control variables. Panel A considers two alternative measures of bondholder concentration: the fraction of bonds held by the top-3 and the top-5 largest bondholders. Columns (1)-(2) and (4)-(5) estimate OLS and IV specifications analogous to the baseline specification; in columns (3) and (6), additional instrumental variables for bondholder concentration are introduced, based on the interaction between the top-3 (top-5) investor holdings component consisting of Katrina-exposed investors and the Kat indicator, analogously to  . In panel B, all specifications are based on instrumental variables estimation. Bondholder concentration is again measured using the Herfindahl index H, but in all calendar quarters following hurricane Katrina is fixed at its 2005Q2 value. In this panel, there are no issuer fixed effects and the standard errors are clustered around date. In columns (1) and (3), the dependent variable is the bond yield spread observed in the same quarter as bondholder concentration H; in columns (2) and (4), it is observed four quarters later, as in columns (4)-(5) of Table V in the text. In columns (3)-(4), the set of instruments is augmented to include interactions between  and indicators for each of four quarters following hurricane Katrina. In both panels, the sample consists of all the issuer-seniority class (issuer) groups of bonds in the Bank of America Merrill Lynch Corporate and High Yield Master Bond Index Database over the period between 1998Q1 and 2007Q4, excluding 24 bonds issued by (re)insurance companies affected by hurricane Katrina as described in Appendix A. To include a given bond in the sample, we require the availability of bond characteristics in the Mergent Fixed Income Securities Database (FISD) and firm characteristics in the Compustat Fundamentals quarterly database. The symbols *, **, and *** denote statistical significance at the 10%, 5%, and 1% levels.
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