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In search of distress risk in emerging markets

Gonzalo Asis, Anusha Chari () and Adam Haas

Journal of International Economics, 2021, vol. 131, issue C

Abstract: This paper employs a novel multi-country dataset of corporate defaults to develop a model of distress risk specific to emerging markets. The data suggest that global financial variables such as US interest rates and shifts in global liquidity and risk aversion have significant predictive power for forecasting corporate distress risk in emerging markets. We document a positive distress risk premium in emerging market equities and show that the impact of a global “risk-off” environment on default risk is greater for firms whose returns are more sensitive to a composite global factor.

Keywords: Emerging markets; Distress risk; Corporate debt; Global factors; Default probabilities; Asset pricing implications (search for similar items in EconPapers)
JEL-codes: F3 G12 G15 G33 (search for similar items in EconPapers)
Date: 2021
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Working Paper: In Search of Distress Risk in Emerging Markets (2020) Downloads
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DOI: 10.1016/j.jinteco.2021.103463

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