The Determinants of Corporate Risk in Emerging Markets: An Option-Adjusted Spread Analysis
AbstractThis study explores the determinants of corporate bond spreads in emerging market economies. Using a largely unexploited dataset, the paper finds that corporate bond spreads are determined by firm-specific variables, bond characteristics, macroeconomic conditions, sovereign risk, and global factors. A variance decomposition analysis shows that firm-level characteristics account for the larger share of the variance. In addition, the paper finds two asymmetries. The first is in line the sovereign ceiling lite hypothesis which states that the transfer of risk from the sovereign to the private sector is less than 1 to 1. 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.
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Bibliographic InfoPaper provided by Inter-American Development Bank in its series IDB Publications with number 6845.
Date of creation: Apr 2007
Date of revision:
Financial Sector; WP-602;
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- Aysun Uluc, 2011.
"An Alternative Method for Measuring Financial Frictions,"
The B.E. Journal of Macroeconomics,
De Gruyter, vol. 11(1), pages 1-31, April.
- Uluc Aysun, 2009. "An alternative method for measuring financial frictions," Working papers 2009-34, University of Connecticut, Department of Economics.
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