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International Pricing of Emerging Market Corporate Debt

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  • Sonja Keller
  • Ashoka Mody

Abstract

We examine risk spreads charged on corporate bonds placed by emerging market borrowers on international exchanges. While global developments have an important effect on spreads, changes in firm-level default risk also matter significantly in a way consistent with theory and experience in mature markets. In contrast, except during periods of financial crisis, country factors play a limited role. These findings go against the supposition that limited information on emerging market firms or significant agency problems prevent firm-level credit discrimination by international investors. The firm-level information capitalization into spreads possibly reflects protection afforded by the exchange listing on international markets.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/26.

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Length: 38
Date of creation: 01 Jan 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/26

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Keywords: Corporate sector; Credit risk; Emerging markets; External borrowing; Risk premium; equity returns; market bond; emerging market bond; equity market; stock market; emerging market bonds; risk-free interest rate; stock exchange; stock price; financial economics; mature markets; stock markets; international finance; stock prices; financial markets; international capital markets; capital flows; bond returns; bond markets; equity prices; stock returns; denominated bonds; new york stock exchange; financial globalization; bond yields; bondholders; bond prices; bond issuance; stock listings; sovereign bonds; global stock markets; american stock exchange; domestic equity; market assets; bond issue; working capital; cash flow; non-investment grade bonds; asset markets; securities dealers; bond rating; debt service; high-yield corporate bonds; equity markets; fixed income securities; stock market decline; currency risk; international securities identification number; returns on bonds; global equity markets; issuance of bonds; capital turnover; measures of volatility;

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