Speed of issuance and the adequacy of disclosure in the 144A high-yield debt market

I document the shift of high-yield issuance from the public to the Rule 144 A private placement market and exploit data on credit spreads to investigat e whether investors regard disclosure in the two markets as comparable. The key implications of the inadequate-disclosure hypothesis are that investor s require premiums on 144A securities and that such premiums are largest fo r first-time bond issuers and privately owned firms about whom less informa tion is publicly available. I find that 144A premiums, though positive init ially, have vanished over time, and I find no evidence of larger 144A premi ums for first-time issuers or private firms. Investors do, however, require premiums of first-time issuers, and to a lesser extent of privately owned firms, regardless of whether securities are issued in the 144A or public ma rket. These findings imply that sophisticated investors do not value the in cremental information provided by securities registration, but do value ong oing disclosure. (C) 2000 Elsevier Science S.A. All rights reserved.