scholarly journals US Corporate Bond Yield Spread: A Default Risk Debate

2013 ◽  
Author(s):  
Syed Muhammad Noaman Ahmed Shah ◽  
Mazen Kebewar
Keyword(s):  
Default Risk ◽  
Corporate Bond ◽  
Yield Spread ◽  
Bond Yield

Management Earnings Forecasts and the Cost of Debt

2019 ◽  
pp. 0148558X1988731
Author(s):  
Norio Kitagawa ◽  
Akinobu Shuto
Keyword(s):  
Default Risk ◽  
Lower Cost ◽  
Earnings Forecasts ◽  
Bond Market ◽  
Cost Of Debt ◽  
Yield Spread ◽  
Management Earnings Forecasts ◽  
Bond Yield ◽  
Earnings Benchmarks ◽  
The Cost

Prior studies have indicated that earnings are useful for bond market investors and that beating earnings benchmarks is related to a firm’s lower cost of debt. This study examines whether management earnings forecasts are related to a firm’s cost of debt. Our results indicate that (a) positive forecast innovations (i.e., forecasted increases in earnings) are related to a firm’s lower bond yield spread after controlling for the effect of other earnings benchmarks and (b) the negative association between positive forecast innovations and bond yield spread is weaker for firms with high default risk than for those with low default risk. The results suggest that management earnings forecasts are useful for investors in the Japanese bond market and are consistent with the findings in the equity market. However, the usefulness of management earnings forecasts in the bond market depends on a firm’s level of default risk. Our results suggest that bond investors discount the management earnings forecasts of firms with high default risk because such forecasts are more likely to have an optimistic bias.

scholarly journals DETERMINANTS OF CORPORATE BOND YIELD: THE CASE OF MALAYSIAN BOND MARKET

2017 ◽  
Vol 17 (2) ◽  
Author(s):  
Norliza Che-Yahya ◽  
Ruzita Abdul-Rahim ◽  
Rasidah Mohd-Rashid
Keyword(s):  
Default Risk ◽  
Bond Market ◽  
Corporate Bond ◽  
Cross Sectional ◽  
Return On Equity ◽  
Trading Frequency ◽  
Bond Yield ◽  
Equity Ratio ◽  
The Individual ◽  
Individual Issue

Default risk has been recognized as one of the key determinants of bond yield. Past studies argue that default risk can be reflected by issue characteristics, issuer characteristics and interest rate behaviors on riskless security. As default risk is believed to be higher in developing markets due to the issue of illiquidity, capital inadequacy and a developing lending system, more empirical works must be focused on these markets. The present study examines the association between selected determinants and corporate bond yield in Malaysian market. Instead of focusing on the aggregate market level as has widely been carried out in previous studies, the present study concentrates on the individual issue level. The results of cross-sectional multiple regression analyses based on 61 observations in 2012 indicate that bond maturity, coupon payment, trading frequency, issuer’s rating, debt to equity ratio and return on equity ratio are the significant determinants of bond yield.Keywords: Corporate Bond Yield; Malaysian Bond Market.

Beating Earnings Benchmarks and the Cost of Debt

2008 ◽  
Vol 83 (2) ◽  
pp. 377-416 ◽  
Author(s):  
John (Xuefeng) Jiang
Keyword(s):  
Default Risk ◽  
Lower Cost ◽  
Cost Of Debt ◽  
Bond Markets ◽  
Yield Spread ◽  
Bond Yield ◽  
Earnings Benchmarks ◽  
Debt Market ◽  
The Cost ◽  
Firm Default

Prior research documents that firms tend to beat three earnings benchmarks—zero earnings, last year's earnings, and analyst's forecasted earnings—and that there are both equity market and compensation-related benefits associated with beating these benchmarks. This study investigates whether and under what conditions beating these three earnings benchmarks reduces a firm's cost of debt. I use two proxies for a firm's cost of debt: credit ratings and initial bond yield spread. Results suggest that firms beating earnings benchmarks have a higher probability of rating upgrades and a smaller initial bond yield spread. Additional analyses indicate that (1) the benefits of beating earnings benchmarks are more pronounced for firms with high default risk; (2) beating the zero earnings benchmark generally provides the biggest reward in terms of a lower cost of debt; and (3) the reduction in the cost of debt is attenuated but does not disappear for firms beating benchmarks through earnings management. In sum, results suggest that there are benefits associated with beating earnings benchmarks in the debt market. These benefits vary by benchmark, firm default risk, and method utilized to beat the benchmark. Among other implications, this evidence suggests that the relative importance of specific benchmarks differs across the equity and bond markets.

scholarly journals Uji Empirik Crowding Out Surat Utang Pemerintah dan Korporasi di Pasar Modal Indonesia

2018 ◽  
pp. 19 ◽  
Author(s):  
Buddi Wibowo ◽  
Hendrikus Passagi ◽  
Muhammad Budi Prasetyo
Keyword(s):  
Default Risk ◽  
Financial Stability ◽  
Banking Sector ◽  
Fixed Effect Model ◽  
Bond Market ◽  
Corporate Bond ◽  
Crowding Out ◽  
Yield Spread ◽  
Corporate Bond Market ◽  
The Government

Financing government budget deficit through emission of government  bonds may create a crowding out in corporate bond market. Crowding out caused the cost of funds incurred by the corporation to be expensive so the corporate bond market is stagnant and banks become the only major source of funding. Sources of funding that are so dependent on the banking sector could threaten financial stability and the country's economy as a whole because of the banks’ systemic risk. Default of a bank not only can influence other banks but also can have a serious impact on the national economy. This research empirically examine the phenomenon of crowding out in Indonesia with a fixed effect model of panel data FGLS and show existence of crowding out, where the yield spread tends to rise when the government issued new debt securities. But the rise in the yield spread was more due to the increase in Credit Default Swaps (CDS) spreads which reflect the default risk of Indonesia, as well as showing the influence of foreign investors in the Indonesian capital market which is strongly influenced by  CDS.

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