Informed trading in public debt markets

This study examines the occurrence of informed trading in public debt issued by companies in the United States. I find that earnings surprises are positively associated with bond price changes prior to the release of financial report data to the public, for firms with non-investment-grade ratings. Additionally, I find that the effect appears to be driven by firms with publicly traded equity. Evidence further indicates an increase in trading activity during the time window between report period end date and filing date, for firms with larger earnings surprises.