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A Note on Credit Risk of Vertical Keiretsu Firms: Preliminary Evidence from the Japanese Automobile Industry

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  • Naoya Takezawa

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  • Nobuya Takezawa

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Abstract

This paper empirically examines the relationship between the credit risk of Toyota, Nissan and Honda keiretsu-affiliated firms and the credit risk of the respective parent company. As credit spread data for keiretsu-affiliated firms were not available we create a keiretsu default index, as a proxy, using expected default probabilities obtained from the KMV and Leland and Toft (J. Finance 51, 987–1019, 1996) option pricing models. We find parent credit spreads do not Granger cause our keiretsu default index and vice versa in a bivariate vector autoregressive (VAR) framework. Copyright Springer Science + Business Media, Inc. 2003

Suggested Citation

  • Naoya Takezawa & Nobuya Takezawa, 2003. "A Note on Credit Risk of Vertical Keiretsu Firms: Preliminary Evidence from the Japanese Automobile Industry," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 10(4), pages 377-398, December.
  • Handle: RePEc:kap:apfinm:v:10:y:2003:i:4:p:377-398 DOI: 10.1007/s10690-005-4248-5
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    References listed on IDEAS

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    1. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-370, March.
    2. Hayne E. Leland and Klaus Bjerre Toft., 1995. "Optimal Capital Structure, Endogenous Bankruptcy, and the Term Structure of Credit Spreads," Research Program in Finance Working Papers RPF-259, University of California at Berkeley.
    3. Leland, Hayne E & Toft, Klaus Bjerre, 1996. " Optimal Capital Structure, Endogenous Bankruptcy, and the Term Structure of Credit Spreads," Journal of Finance, American Finance Association, vol. 51(3), pages 987-1019, July.
    4. Takeo Hoshi & Anil Kashyap, 2004. "Corporate Financing and Governance in Japan: The Road to the Future," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582481, January.
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