The determinants of corporate risk in emerging markets: An option-adjusted spreads analysis

Arbeitspapier

This study explores the determinants of corporate bond spreads in emerging markets 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 602

Classification and Topics

• Classification: Wirtschaft ; Interest Rates: Determination, Term Structure, and Effects ; International Finance: General ; International Lending and Debt Problems ; International Financial Markets
• Subject: Corporate Bond Spreads ; Sovereign Ceiling ; Default Risk ; Emerging Market

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Cavallo, Eduardo ; Valenzuela, Patricio
• Event: Veröffentlichung
• (who): Inter-American Development Bank, Research Department
• (where): Washington, DC
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/51477
• Last update: 10.03.2025, 11:43 AM CET