A Note on Credit Risk of Vertical Keiretsu Firms: Preliminary Evidence from the Japanese Automobile Industry

Naoya Takezawa () and Nobuya Takezawa ()

Asia-Pacific Financial Markets, 2003, vol. 10, issue 4, 377-398

Abstract: This paper empirically examines the relationship between the credit risk of Toyota, Nissan and Honda keiretsu-affiliated firms and the credit risk of the respective parent company. As credit spread data for keiretsu-affiliated firms were not available we create a keiretsu default index, as a proxy, using expected default probabilities obtained from the KMV and Leland and Toft (J. Finance 51, 987–1019, 1996) option pricing models. We find parent credit spreads do not Granger cause our keiretsu default index and vice versa in a bivariate vector autoregressive (VAR) framework. Copyright Springer Science + Business Media, Inc. 2003

Keywords: automobile; default probability; Keiretsu; KMV; option pricing; vector autoregression (search for similar items in EconPapers)
Date: 2003
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DOI: 10.1007/s10690-005-4248-5

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