The effects of company announcements on bond prices listed on a stock exchange

Abstract

The thesis will determine if there are effects on bond prices by company announcements. Therefore, the bonds have to be listed on an exchange since company announcements are made public on an exchange. However, particular emphasis is given to bonds listed on the Malta Stock Exchange. This is done to get an insight on why Maltese investors buy bonds and for what reason do they hold such bonds. This is an important area where Maltese investors are moving away from the traditional depositing money in a bank to investing their money in other assets. Through qualitative structured interviews with various stock brokers, the common denominator was that Maltese investors, especially retail investors, tend to buy and hold the bonds till maturity to sustain their income whereas professional investors tend to use more sophisticated systems to diversify better their portfolios. Currently, one of the major challenges that the government is facing is the sustainability of national state pensions due to an aging population. This has prompted Maltese clients and retail investors to invest their money in longer term assets such as bonds. Another problem that restricts investors to trade is the lack of liquidity on the Malta Stock Exchange whereas other larger stock exchanges, such as the London Stock Exchange, are far more liquid and bond prices are adjusted on a daily basis. This study has concluded that professional investors and financial institutions have a better understanding of financial markets, both local and foreign markets, as they understand better situations that financial markets are in. Retail clients also follow on the updates of financial markets but they also rely upon meetings with stock brokers to discuss the performance of their investments.