The Corporate Bond Market Crises and the Government Response

The purpose of this paper is to investigate the persistence of seasonality in stock and bond returns using data from 1926 to 1992. This study finds evidence of seasonality in stock returns during the 1926-92 period.  Dividing the data into sub-periods yields the following results: there was no evidence of stock market seasonality from 1926 to 1940, seasonality increased between 1941 and 1975 and then diminished slightly from 1976 to 1992. Specifically, the average January return was found to be significantly different than the average return in the other eleven months of the year.  Seasonality was found in the high-quality end of the corporate bond market during the 1966-78 period, but there was no evidence of seasonality in the government bond market.

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Uji Empirik Crowding Out Surat Utang Pemerintah dan Korporasi di Pasar Modal Indonesia

Jurnal Ekonomi Kuantitatif Terapan ◽

10.24843/jekt.2018.v11.i01.p02 ◽

2018 ◽

pp. 19 ◽

Cited By ~ 1

Author(s):

Buddi Wibowo ◽

Hendrikus Passagi ◽

Muhammad Budi Prasetyo

Keyword(s):

Default Risk ◽

Financial Stability ◽

Banking Sector ◽

Fixed Effect Model ◽

Bond Market ◽

Corporate Bond ◽

Crowding Out ◽

Yield Spread ◽

Corporate Bond Market ◽

The Government

Financing government budget deficit through emission of government bonds may create a crowding out in corporate bond market. Crowding out caused the cost of funds incurred by the corporation to be expensive so the corporate bond market is stagnant and banks become the only major source of funding. Sources of funding that are so dependent on the banking sector could threaten financial stability and the country's economy as a whole because of the banks’ systemic risk. Default of a bank not only can influence other banks but also can have a serious impact on the national economy. This research empirically examine the phenomenon of crowding out in Indonesia with a fixed effect model of panel data FGLS and show existence of crowding out, where the yield spread tends to rise when the government issued new debt securities. But the rise in the yield spread was more due to the increase in Credit Default Swaps (CDS) spreads which reflect the default risk of Indonesia, as well as showing the influence of foreign investors in the Indonesian capital market which is strongly influenced by CDS.

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The Theory and Empirics of Financial Development in the East Asian Bond Markets

Vienna Journal of East Asian Studies ◽

10.2478/vjeas-2014-0003 ◽

2014 ◽

Vol 5 (1) ◽

pp. 45-76

Author(s):

Thomas Kemetmüller

Keyword(s):

Financial Crisis ◽

Financial Development ◽

Global Financial Crisis ◽

East Asian ◽

Bond Market ◽

Corporate Bond ◽

Bond Markets ◽

Government Bond ◽

Corporate Bond Market ◽

The Government

Abstract The Asian financial crisis marked a turning point in financial development in East Asia that brought the development of bond markets within the focus of policy-makers. This paper tracks the benefits of an advanced bond market, the current state of the East Asian corporate and government bond markets and their rapid evolution since the Asian crisis. Subsequently, a multivariate model is used to determine the endogenous economic and institutional factors that drove growth in the region’s bond markets. The following findings may be noted: (1) growth in the government bond market was driven by the monetary sterilisation efforts of East Asian central banks in order to cope with excessive liquidity, (2) the government bond market may crowd out the corporate bond market, and (3) the corporate bond market grew particularly strongly during the global financial crisis.

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