The Determinants of Corporate Risk in Emerging Markets: An Option-Adjusted Spread Analysis

Eduardo Cavallo and Patricio Valenzuela

No 1953, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: This study explores the determinants of corporate bond spreads in emerging market economies. Using a largely unexploited dataset, the paper finds that corporate bond spreads are determined by firm-specific variables, bond characteristics, macroeconomic conditions, sovereign risk, and global factors. A variance decomposition analysis shows that firm-level characteristics account for the larger share of the variance. In addition, the paper finds two asymmetries. The first is in line the sovereign ceiling lite hypothesis which states that the transfer of risk from the sovereign to the private sector is less than 1 to 1. The second is consistent with the popular notion that panics are common in emerging markets where investors are less informed and more prone to herding.

Keywords: WP-602 (search for similar items in EconPapers)
JEL-codes: E43 F30 F34 G15 (search for similar items in EconPapers)
Date: 2007-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://publications.iadb.org/publications/english ... -Spread-Analysis.pdf (application/pdf)

Related works:
Journal Article: The determinants of corporate risk in emerging markets: an option-adjusted spread analysis (2010)
Working Paper: The Determinants of Corporate Risk in Emerging Markets: An Option-Adjusted Spread Analysis (2007)
Working Paper: The Determinants of Corporate Risk in Emerging Markets: An Option-Adjusted Spread Analysis (2007)
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:idb:brikps:1953

Access Statistics for this paper

More papers in IDB Publications (Working Papers) from Inter-American Development Bank Contact information at EDIRC.
Bibliographic data for series maintained by Felipe Herrera Library ().