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Credit spreads on corporate bonds and the macroeconomy in Japan

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  • Nakashima, Kiyotaka
  • Saito, Makoto

Abstract

Using secondary market data on corporate bonds issued in Japan between 1997 and 2005, this paper explores the determinants of the credit spread of corporate bond rates over interest swap rates. We find that the credit spreads properly reflect financial factors at the firm level, including debt-to-equity ratios, volatility, and maturity, particularly for longer-term bonds. In addition, an economy-wide factor common among bond issues unable to be captured by firm-level factors, plays an important role in determining credit spreads, and these economy-wide effects to a great extent cancel out firm-level factors for some subsample periods. We also identify possible factors responsible for the significant economy-wide effects.

Suggested Citation

  • Nakashima, Kiyotaka & Saito, Makoto, 2009. "Credit spreads on corporate bonds and the macroeconomy in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 23(3), pages 309-331, September.
  • Handle: RePEc:eee:jjieco:v:23:y:2009:i:3:p:309-331
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    Cited by:

    1. repec:eee:jjieco:v:45:y:2017:i:c:p:27-36 is not listed on IDEAS
    2. Takanori Tanaka, 2011. "Corporate Governance and the Costs of Public Debt Financing: Evidence from Japan," Discussion Papers in Economics and Business 11-35, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
    3. Tanaka, Takanori, 2014. "Corporate governance and the cost of public debt financing: Evidence from Japan," Journal of the Japanese and International Economies, Elsevier, pages 315-335.

    More about this item

    Keywords

    Credit spreads Corporate bonds Market liquidity;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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