Country and industry effects in corporate bond spreads in emerging markets

We use corporate bond data from firms belonging to 13 emerging markets and eight industries from 2007 to 2013 to study whether and how country and industry effects determine the spread between their yield and the respective sovereign debt yield. Existing models ignore country and industry effects as...

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Autores Principales: Garay, U., González, M., Rosso, J.
Formato: Artículo (Article)
Lenguaje:Inglés (English)
Publicado: 2020
Materias:
Acceso en línea:http://hdl.handle.net/1992/47021
id ir-1992-47021
recordtype dspace
spelling ir-1992-470212020-11-04T20:25:23Z Country and industry effects in corporate bond spreads in emerging markets Garay, U. González, M. Rosso, J. Emerging markets Corporate debt Sovereign debt Country and industry effects We use corporate bond data from firms belonging to 13 emerging markets and eight industries from 2007 to 2013 to study whether and how country and industry effects determine the spread between their yield and the respective sovereign debt yield. Existing models ignore country and industry effects as they implicitly assume that firm, bond issues, local, and global factors capture these effects. We find that country and, especially, industry effects are significant in explaining corporate bond spreads. From a practitioner's point of view, our results are important as ignoring country and industry effects causes bonds to be mispriced in emerging markets, particularly in the energy, basic materials, and communications and technology sectors. We also find country effects for bonds from firms from Chile, Indonesia, and the Philippines, although with lower significance levels. Finally, and consistent with other recent papers, we also find violations of the sovereign ceiling rule. 2020-10-01T16:51:08Z 2020-10-01T16:51:08Z 2017 article publishedVersion http://hdl.handle.net/1992/47021 10.1016/j.jbusres.2017.09.021 https://doi.org/10.1016/j.jbusres.2017.09.021 eng openAccess application/pdf instname:Universidad de los Andes reponame:Repositorio Institucional Séneca
institution Universidad de los Andes
collection DSpace
language Inglés (English)
topic Emerging markets
Corporate debt
Sovereign debt
Country and industry effects
spellingShingle Emerging markets
Corporate debt
Sovereign debt
Country and industry effects
Garay, U.
González, M.
Rosso, J.
Country and industry effects in corporate bond spreads in emerging markets
description We use corporate bond data from firms belonging to 13 emerging markets and eight industries from 2007 to 2013 to study whether and how country and industry effects determine the spread between their yield and the respective sovereign debt yield. Existing models ignore country and industry effects as they implicitly assume that firm, bond issues, local, and global factors capture these effects. We find that country and, especially, industry effects are significant in explaining corporate bond spreads. From a practitioner's point of view, our results are important as ignoring country and industry effects causes bonds to be mispriced in emerging markets, particularly in the energy, basic materials, and communications and technology sectors. We also find country effects for bonds from firms from Chile, Indonesia, and the Philippines, although with lower significance levels. Finally, and consistent with other recent papers, we also find violations of the sovereign ceiling rule.
format Artículo (Article)
author Garay, U.
González, M.
Rosso, J.
author_facet Garay, U.
González, M.
Rosso, J.
author_sort Garay, U.
title Country and industry effects in corporate bond spreads in emerging markets
title_short Country and industry effects in corporate bond spreads in emerging markets
title_full Country and industry effects in corporate bond spreads in emerging markets
title_fullStr Country and industry effects in corporate bond spreads in emerging markets
title_full_unstemmed Country and industry effects in corporate bond spreads in emerging markets
title_sort country and industry effects in corporate bond spreads in emerging markets
publishDate 2020
url http://hdl.handle.net/1992/47021
_version_ 1705934362616266752
score 11,828437