Pricing The Public Debt of Business Groups: the U.S. Market

Corporate finance textbooks typically focus on standalone companies, but many firms operate within corporate groups. This study explores how business group affiliation influences the debt costs of parent and subsidiary firms in the U.S. corporate bond market. After an institutional overview in Chapter 1, Chapter 2 presents the theoretical framework on the impact of group membership on borrowing costs. Chapter 3 empirically examines the debt costs of parent and subsidiary firm in the U.S. bond market. The findings reveal that subsidiary firms benefit from lower debt costs due to implicit guarantees from their parent companies. This research is aimed at researchers and university professors studying bond markets and firm organizational structure.