Advanced Search

Papers Articles Authors Institutions Data (FRED®)

Abstract

This study explores the determinants of corporate bond spreads in emerging markets economies. Using a largely unexploited data set, the paper finds that corporate bond spreads are determined by firm-specific variables, bond characteristics, macroeconomic conditions, country-specific sovereign risk, and global factors. A variance decomposition analysis shows that firm-level performance indicators account for the larger share of the variance. In addition, the paper finds that corporate spreads respond more acutely to sovereign and global risk increases rather than to decreases. This suggests two asymmetries prevalent in the data. The first is in line with the sovereign ceiling 'lite' hypothesis, which states that it appears from spreads data that sovereign risk remains a significant determinant of corporate risk although credit rating agencies have gradually moved away from a policy of never rating a corporate above the sovereign. The second is consistent with the popular notion that panics are common in emerging markets where investors are less informed and more prone to herding. Copyright © 2009 John Wiley & Sons, Ltd.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1002/ijfe.398
File Function: Link to full text; subscription required
Download Restriction: no

Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 15 (2010)
Issue (Month): 1 ()
Pages: 59-74

as HTML HTML with abstract plain text plain text with abstract BibTeX RIS (EndNote, RefMan, ProCite) ReDIF in new window

Handle: RePEc:ijf:ijfiec:v:15:y:2010:i:1:p:59-74

Contact details of provider:
Web page: http://www.interscience.wiley.com/jpages/1076-9307/

Order Information:
Web: http://jws-edcv.wiley.com/jcatalog/JournalsCatalogOrder/JournalOrder?PRINT_ISSN=1076-9307

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
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.:

as HTML HTML with abstract plain text plain text with abstract BibTeX RIS (EndNote, RefMan, ProCite) ReDIF in new window

1. Durbin, Erik & Ng, David, 2005. "The sovereign ceiling and emerging market corporate bond spreads," Journal of International Money and Finance, Elsevier, vol. 24(4), pages 631-649, June.
2. Merton, Robert C., 1973. "On the pricing of corporate debt: the risk structure of interest rates," Working papers 684-73., Massachusetts Institute of Technology (MIT), Sloan School of Management.
   
   • Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-70, May.
3. Eduardo Borensztein & Patricio Valenzuela & Kevin Cowan, 2007. "Sovereign Ceilings 'Lite'? the Impact of Sovereign Ratings on Corporate Ratings in Emerging Market Economies," IMF Working Papers 07/75, International Monetary Fund.
4. John Y. Campbell & Glen B. Taksler, 2002. "Equity Volatility and Corporate Bond Yields," Harvard Institute of Economic Research Working Papers 1945, Harvard - Institute of Economic Research.
   
   • John Y. Campbell & Glen B. Taksler, 2003. "Equity Volatility and Corporate Bond Yields," Journal of Finance, American Finance Association, vol. 58(6), pages 2321-2350, December.
   • Campbell, John & Taksler, Glen, 2003. "Equity Volatility and Corporate Bond Yields," Scholarly Articles 3153307, Harvard University Department of Economics.
   • John Y. Campbell & Glen B. Taksler, 2002. "Equity Volatility and Corporate Bond Yields," NBER Working Papers 8961, National Bureau of Economic Research, Inc.
5. Enrique G. Mendoza & Guillermo A. Calvo, 2000. "Capital-Markets Crises and Economic Collapse in Emerging Markets: An Informational-Frictions Approach," American Economic Review, American Economic Association, vol. 90(2), pages 59-64, May.
6. Marcel Peter & Martín Grandes, 2005. "How Important Is Sovereign Risk in Determining Corporate Default Premia? The Case of South Africa," IMF Working Papers 05/217, International Monetary Fund.
7. Barry Eichengreen & Ricardo Hausmann & Ugo Panizza, 2003. "Currency Mismatches, Debt Intolerance and Original Sin: Why They Are Not the Same and Why it Matters," NBER Working Papers 10036, National Bureau of Economic Research, Inc.
8. Mitchell A. Petersen, 2005. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," NBER Working Papers 11280, National Bureau of Economic Research, Inc.
   
   • Mitchell A. Petersen, 2009. "Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches," Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 435-480, January.

Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

as HTML HTML with abstract plain text plain text with abstract BibTeX RIS (EndNote, RefMan, ProCite) ReDIF in new window

Cited by:

1. Keith Kuester & Gernot J. Mueller & Giancarlo Corsetti & André Meier, 2012. "Sovereign Risk, Fiscal Policy, and Macroeconomic Stability," IMF Working Papers 12/33, International Monetary Fund.
   
   • Corsetti, Giancarlo & Kuester, Keith & Meier, André & Müller, Gernot, 2012. "Sovereign Risk, Fiscal Policy, and Macroeconomic Stability," CEPR Discussion Papers 8779, C.E.P.R. Discussion Papers.
2. Uluc Aysun, 2009. "An alternative method for measuring financial frictions," Working papers 2009-34, University of Connecticut, Department of Economics.
   
   • Uluc Aysun, 2011. "An Alternative Method for Measuring Financial Frictions," The B.E. Journal of Macroeconomics, Berkeley Electronic Press, vol. 11(1), pages 7.
3. Ağca, Şenay & Celasun, Oya, 2012. "Sovereign debt and corporate borrowing costs in emerging markets," Journal of International Economics, Elsevier, vol. 88(1), pages 198-208.
4. Uluc Aysun & Ryan Brady & Adam Honig, 2011. "Financial Frictions and the Credit Channel of Monetary Transmission," Working Papers 2011-03, University of Central Florida, Department of Economics.
5. Eduardo A. Cavallo & Christian Daude, 2008. "Public Investment in Developing Countries: A Blessing or a Curse?," Research Department Publications 4597, Inter-American Development Bank, Research Department.
   
   • Cavallo, Eduardo & Daude, Christian, 2011. "Public investment in developing countries: A blessing or a curse?," Journal of Comparative Economics, Elsevier, vol. 39(1), pages 65-81, March.
6. Giancarlo Corsetti & Keith Kuester & Andre Meier & Gernot J. Muller, 2011. "Soverign risk and the effects of fiscal retrenchment in deep recessions," Working Papers 11-43, Federal Reserve Bank of Philadelphia.
7. Sanjeev Gupta & Amine Mati & Emanuele Baldacci, 2008. "Is it (Still) Mostly Fiscal? Determinants of Sovereign Spreads in Emerging Markets," IMF Working Papers 08/259, International Monetary Fund.
8. Uluc Aysun & Ryan Brady & Adam Honig, 2009. "Financial Frictions and Monetary Transmission Strength: A Cross-Country Analysis," Working papers 2009-24, University of Connecticut, Department of Economics, revised Jun 2010.
9. Giovanni Majnoni & Andrew Powell, 2011. "On Endogenous Risk, the Amplification Effects of Financial Systems and Macro Prudential Policies," Research Department Publications 4726, Inter-American Development Bank, Research Department.
10. Surach Tanboon & Suchot Piamchol & Tanawat Ruenbanterng & Paiboon Pongpaichet, 2009. "Impacts of Financial Factors on Thailand's Business Cycle Fluctuations," Working Papers 2009-01, Economic Research Department, Bank of Thailand.
11. VALENZUELA, Patricio, 2012. "Essays on the Cost of Debt Capital for Private Firms," Open Access publications from European University Institute urn:hdl:1814/22074, European University Institute.
12. Sanjeev Gupta & Carlos Mulas-Granados & Emanuele Baldacci, 2009. "How Effective is Fiscal Policy Response in Systemic Banking Crises?," IMF Working Papers 09/160, International Monetary Fund.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ijf:ijfiec:v:15:y:2010:i:1:p:59-74

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

---

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.

Privacy Legal