What does Nasdaq's high-yield bond market reveal about bondholder-stockholder conflicts?

We use data from Nasdaq's FIPS system for reporting transactions in selected high-yield corporate bonds to investigate the relationship between the returns on a firm's stock and the returns on its publicly traded, high-yield debt. Regression models and analysis of the behavior of the returns around events associated with agency conflict show that the returns follow complex patterns of similarity and divergence. Positive co-movement is the dominant form of the relationship, but opposite movement of the bond and stock returns around those events indicates agency conflicts between bondholders and stockholders.