Asymmetric determinants of corporate bond credit spreads in China: Evidence from a nonlinear ARDL model

Xiao-Lin Li, Xin Li and Deng-Kui Si

The North American Journal of Economics and Finance, 2020, vol. 52, issue C

Abstract: This study utilizes the nonlinear ARDL (NARDL) model proposed by Shin, Yu, and Greenwood-Nimmo (2014) to quantify the potentially asymmetric transmission of positive and negative changes in each of the possible determinants of industry-level corporate bond credit spreads in China. The determinants we consider include the corresponding industry stock price, China’s stock market volatility, the level and slope of the yield curve (i.e., the interest rate), the industrial production growth rate, and the inflation rate. The empirical results suggest substantial asymmetric effects of these determinants on credit spreads, with the positive changes in the determinants showing larger impacts than the negative changes for most industries we consider. Moreover, the corresponding industry stock prices, the interest rate, and the industrial production growth rate negatively drive the industry credit spreads for many industries. In turn, China’s stock market volatility and the inflation rate positively affect the credit spreads at each industry level. These findings may be helpful to investors, bond issuers and policymakers in understanding the dynamics of credit risks and corporate bond rates at the industry level.

Keywords: Corporate bond; Credit spreads; Credit risk; Asymmetry; NARDL model (search for similar items in EconPapers)
JEL-codes: E43 G12 G32 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062940819302700
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:52:y:2020:i:c:s1062940819302700

DOI: 10.1016/j.najef.2019.101109

Access Statistics for this article

The North American Journal of Economics and Finance is currently edited by Hamid Beladi

More articles in The North American Journal of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().