Liquidity Risk and Corporate Bond Yield Spread: Evidence from China
Yinghui Chen and
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Yinghui Chen: School of Accounting, Zhongnan University of Economics and Law
No 2019/9, CFDS Discussion Paper Series from Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China
This paper investigates the contribution of liquidity risk to Chinese corporate bond spreads. We calculate corporate bond spreads based on the full treasury yield curve and establish a set of liquidity measures of the Chinese corporate bonds. Our empirical study shows that liquidity premium accounts for a relatively smaller portion of corporate bond spread in China, although the market liquidity is low and corporate bond issuers are strictly pre-screened. These findings are interesting, as the developed markets have better liquidity and less pre-issuance restriction, and liquidity premium still explains a relatively larger portion of corporate bond spread. Besides, we also explore the determinants of Chinese corporate bond liquidity and default premiums.
Keywords: Yield spread; Liquidity risk; Default risk (search for similar items in EconPapers)
JEL-codes: C23 G12 (search for similar items in EconPapers)
Pages: 52 pages
New Economics Papers: this item is included in nep-ore, nep-rmg and nep-tra
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http://cfds.henuecon.education/images/dpaper/WP_9_ ... _Bond_Liquidity1.pdf First version, 2019 (application/pdf)
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Persistent link: https://EconPapers.repec.org/RePEc:fds:dpaper:201909
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