Competition, Rating Shopping and Yield Spread: Evidence from Chinese Enterprise Bond Market

2018 ◽  
Author(s):  
Shaoyu LI ◽  
Henry Hongren Huang ◽  
Jeffrey Oxman
Keyword(s):  
Bond Market ◽  
Yield Spread ◽  
Chinese Enterprise ◽  
Enterprise Bond

Management Earnings Forecasts and the Cost of Debt

2019 ◽  
pp. 0148558X1988731
Author(s):  
Norio Kitagawa ◽  
Akinobu Shuto
Keyword(s):  
Default Risk ◽  
Lower Cost ◽  
Earnings Forecasts ◽  
Bond Market ◽  
Cost Of Debt ◽  
Yield Spread ◽  
Management Earnings Forecasts ◽  
Bond Yield ◽  
Earnings Benchmarks ◽  
The Cost

Prior studies have indicated that earnings are useful for bond market investors and that beating earnings benchmarks is related to a firm’s lower cost of debt. This study examines whether management earnings forecasts are related to a firm’s cost of debt. Our results indicate that (a) positive forecast innovations (i.e., forecasted increases in earnings) are related to a firm’s lower bond yield spread after controlling for the effect of other earnings benchmarks and (b) the negative association between positive forecast innovations and bond yield spread is weaker for firms with high default risk than for those with low default risk. The results suggest that management earnings forecasts are useful for investors in the Japanese bond market and are consistent with the findings in the equity market. However, the usefulness of management earnings forecasts in the bond market depends on a firm’s level of default risk. Our results suggest that bond investors discount the management earnings forecasts of firms with high default risk because such forecasts are more likely to have an optimistic bias.

scholarly journals Industrial Revenue Bonds: Tests Of The Bank Arbitrage Hypothesis, The Miller Hypothesis, And Segmentation Of The Tax-Exempt Bond Market

2011 ◽  
Vol 11 (2) ◽  
pp. 110
Author(s):  
David S. Allen
Keyword(s):  
Commercial Bank ◽  
Market Segmentation ◽  
Strong Evidence ◽  
Bond Market ◽  
Yield Spread ◽  
Corporate Tax ◽  
Tax Rate ◽  
Empirical Results ◽  
Tax Exempt ◽  
Alternative Hypotheses

This paper considers alternative hypotheses that have been set forth to explain the relative yields on taxable and tax-exempt securities: the Bank Arbitrage Hypothesis, the Corporate Tax-Rate Hypothesis, and the Market Segmentation Hypothesis. The empirical results indicate support for the Bank Arbitrage Hypothesis for short maturities, and the modified Corporate Tax-Rate Hypothesis for long maturities. They also indicate strong evidence of market segmentation among tax-exempt securities of differing maturities. Specifically, commercial bank demand for tax-exempt securities has a significant effect on the yield spread for short and intermediate maturities, but no such effect is observed for long maturities.

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

2018 ◽  
pp. 19 ◽  
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.

scholarly journals Eurobond Issue And Firm Value

2011 ◽  
Vol 6 (11) ◽  
Author(s):  
Roya K. Ardalan
Keyword(s):  
Firm Value ◽  
Bond Market ◽  
Portfolio Diversification ◽  
Yield Spread ◽  
Tax Laws ◽  
Withholding Taxes

This study explores differences between US-bonds and Eurobonds and analyzes the effect of some Eurobond characteristics on firm value.  First, it attempts to determine if investors view U.S. and Eurobonds similarly, especially after the change in tax laws that exempted U.S.-bond holders from paying 30 percent withholding taxes.  Then, the paper analyzes the effect of some of the Eurobond issue characteristics such as issue size, issue frequency, yield spread, and maturity term on firm value.  The results show that Eurobonds provide investors an alternative for portfolio diversification, and as a result, the bond market remained segmented.  Also, the increase in firm value was statistically significant for the firm’s first Eurobond issue.  The increase in firm value for the subsequent Eurobond issues was not statistically significant.

scholarly journals The Impact of Government Intervention on Municipal Bond Liquidity Premium: Evidence from China

2019 ◽  
Vol 6 (3) ◽  
pp. 79 ◽  
Author(s):  
Xiao Wan Jiang
Keyword(s):  
Least Squares Method ◽  
Government Intervention ◽  
Liquidity Risk ◽  
Bond Market ◽  
Municipal Bonds ◽  
Yield Spread ◽  
Municipal Bond ◽  
Liquidity Premium ◽  
Short And Long Term ◽  
The Impact

Government intervention is an important factor which restricts the development of municipal bond market in China. Based on the revenue bond innovation pilot policy implemented by the Ministry of Finance in 2017, this paper uses municipal bond trading data of Chinese inter-bank bond market from May 2017 to June 2018 and the two-stage least squares method to study the impact of government intervention on the liquidity premium of municipal bonds. The results of the empirical research show: (1) The liquidity risk of municipal bonds is a factor that affects the yield spread, and the marginal impact of liquidity risk on the yield spread is about 4.6 basis points. (2) After the implementation of the revenue bond innovation pilot policy, the reduction of local government intervention significantly reduced the liquidity premium level of municipal bonds. Based on the above conclusions, we propose policy recommendations for the development of the municipal bond market in the short and long term.

scholarly journals Foreign Investments in the Chinese Bond Markets

2020 ◽  
Vol 6 ◽  
pp. 1
Author(s):  
Kerry Liu ◽  
Keyword(s):  
Yield Curve ◽  
Bond Market ◽  
Bond Markets ◽  
Yield Spread ◽  
Foreign Investments ◽  
Foreign Investors ◽  
Academic Literature ◽  
Specific Effects ◽  
Bond Yield ◽  
Strategic Factors

The Chinese bond market is the second largest in the world. However, studies on Chinese bond markets are very few, and especially there are no studies on foreign investments in the Chinese bond markets. This study fills the gap in the academic literature by focusing on foreign investments in the Chinese bond markets. By using the least-squares model with breaks, this study finds that although, in theory, the factors of exchange rate, yield spread, and yield correlation should play a significant role in attracting foreign investors to invest in the Chinese bond markets, the specific effects depend on the stage of the Chinese bond markets’ open-up. Initially, the main foreign investors are central banks and similar institutions, and they primarily consider more strategic factors than pure return or risk factors. As more institutional investors have entered the Chinese bond markets, the considerations of enhancing risks and/or reducing risks become more significant. The increasing foreign investments will be beneficial to the Chinese bond markets such as more issuance of longer-dated bonds, thus helping China to establish its RMB bond yield curve, and improving the market efficiency. The Chinese authorities should launch more policy initiatives to attract foreign investors.

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