The Sovereign Ceiling and Emerging Market Corporate Bond Spreads
AbstractWe use the spreads of emerging market bonds traded in secondary markets to study investors’ perception of country risk. Speci...cally, we ask whether investors apply the “sovereign ceiling,” 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 ...rms’ home governments. We ...nd several cases where a ...rm’s bond trades at a lower spread than that of the ...rm’s 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.
Download InfoIf 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.
Bibliographic InfoPaper provided by Cornell University, Department of Applied Economics and Management in its series Working Papers with number 127286.
Date of creation: Jun 2002
Date of revision:
Other versions of this item:
- 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.
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.:
- Ian Domowitz & Jack Glen & Ananth Madhavan, .
"Country and Currency Risk Premia in an Emerging Market,"
IPR working papers
97-26, Institute for Policy Resarch at Northwestern University.
- Domowitz, Ian & Glen, Jack & Madhavan, Ananth, 1998. "Country and Currency Risk Premia in an Emerging Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(02), pages 189-216, June.
- Donald R. Lessard, 1996. "Incorporating Country Risk In The Valuation Of Offshore Projects," Journal of Applied Corporate Finance, Morgan Stanley, vol. 9(3), pages 52-63.
- Tom Keck & Eric Levengood & AL Longfield, 1998. "Using Discounted Cash Flow Analysis In An International Setting: A Survey Of Issues In Modeling The Cost Of Capital," Journal of Applied Corporate Finance, Morgan Stanley, vol. 11(3), pages 82-99.
- Frederic S. Mishkin, 1996. "Understanding Financial Crises: A Developing Country Perspective," NBER Working Papers 5600, National Bureau of Economic Research, Inc.
- Edwin J. Elton, 2001. "Explaining the Rate Spread on Corporate Bonds," Journal of Finance, American Finance Association, vol. 56(1), pages 247-277, 02.
- Barry Eichengreen & Ashoka Mody, 1998. "What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?," NBER Working Papers 6408, National Bureau of Economic Research, Inc.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search).
If references are entirely missing, you can add them using this form.