The sovereign ceiling and emerging market corporate bond spreads
AbstractWe use the spreads of emerging market bonds traded in secondary markets to study investorsâ perception of country risk. Speci...cally, we ask whether investors apply the âsovereign ceiling,â which says that no ...rm is more creditworthy than its government. To do this we compare the spreads of bonds issued by ...rms to those of bonds issued by the ...rmsâ home governments. We ...nd several cases where a ...rmâs bond trades at a lower spread than that of the ...rmâs government, indicating that investors do not always apply the sovereign ceiling. Bonds for which this is true tend to have substantial export earnings and/or a close relationship with either a foreign ...rm or with the home government. For countries with lower perceived default risk, we ...nd that investors do not believe that whenever the government defaults, the ...rm will default.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Money and Finance.
Volume (Year): 24 (2005)
Issue (Month): 4 (June)
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Web page: http://www.elsevier.com/locate/inca/30443
Other versions of this item:
- Durbin, Erik & Ng, David T.C., 2002. "The Sovereign Ceiling and Emerging Market Corporate Bond Spreads," Working Papers 127286, Cornell University, Department of Applied Economics and Management.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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