The effect of corporate diversification on credit risk: new evidence from European credit default swap spreads

Rojahn, Joachim; Zechser, Florian

doi:10.1111/acfi.12306

Cited by 2 publications

(2 citation statements)

References 88 publications

(172 reference statements)

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“…In order to enhance understanding of the topic and construct a more accurate model, it is necessary to study the factors which in the majority of cases influence the rates of return of corporate bonds. On the basis of the considered articles [12][13][14][15][16][17][18][19][20][21][22] one can make a conclusion that macroeconomic indicators, and the individual characteristics of issues and issuing companies have a significant impact on the yield factor, while the sectoral affiliation and the location country's characteristics are not always of significance.…”

Section: The Fundamental Factors Which Influence the Yield Spread Of mentioning

confidence: 99%

Do Investors Pay Yield Premiums On Green Bonds?

Ivashkovskaya¹,

Anna²

2020

КФ

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Global shifts in perspectives on environmental concerns and the growing significance of large-scale sustainabilityprograms have brought the issue of green financing to the fore of financial research. In terms of volume, this area hasdemonstrated high growth rates in various types of capital markets.Unfortunately, few studies exist which explore the yields on green bonds in emerging markets in comparison todeveloped ones. As such, in this paper, we contribute new evidence to the field of green financing and outline severalmajor differences between green issues in these types of capital markets.We study yield premiums of green bonds on a sample of 2,450 green issues and comparable traditional bonds over theperiod from 2008 to March 2020. We contribute to the literature by new empirical evidence on green financing.Our results provide evidence of small but statistically significant negative premiums on green bonds of 23,4%1 comparedto the expected yields for standard issues. We also show that the negative premium on green bonds is more pronouncedin developed markets (- 27%2) than in emerging ones (18%3). Moreover, we provide new evidence on the negativepremium-liquidity relationship. Our research concludes that negative premiums are related to a higher level of liquidity:green bonds have lower bid-ask spreads and a higher level of liquidity than traditional ones.These conclusions can assist investors, potential issuing companies, and public authorities in achieving a betterunderstanding of the current situation of the green bond market in global terms.

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Section: The Fundamental Factors Which Influence the Yield Spread Of mentioning

confidence: 99%

Do Investors Pay Yield Premiums On Green Bonds?

Ivashkovskaya¹,

Anna²

2020

КФ

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“…We control for firm size (Rojahn & Zechser, 2019) with the change in the book value of assets. As firm size increases, default risk decreases (Franco et al, 2016; Ogden, 1987).…”

Section: Empirical Designmentioning

confidence: 99%

Default risk and earnings expectations: The role of contract maturity in the credit default swap market

Hill

Taylor

2023

Accounting & Finance

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Agency conflicts increase with contract maturity. As contract maturity increases, managers, acting on behalf of shareholders, have more opportunities to use their discretion in ways that adversely affect future payoffs. Agency theory suggests that when contract maturity increases, creditors place less weight on a firm's growth opportunities in assessing default risk. We present a counter‐argument: because the timing of future payoffs is uncertain, longer‐duration debt provides creditors with a longer horizon over which payoffs are earned. Using credit default swap (CDS) spreads, we demonstrate that the relevance of future earnings expectations increases with CDS maturity. Our results suggest that contract maturity is not a reliable proxy for agency costs when evaluating the credit market relevance of financial information.

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The effect of corporate diversification on credit risk: new evidence from European credit default swap spreads

Cited by 2 publications

References 88 publications

Do Investors Pay Yield Premiums On Green Bonds?

Do Investors Pay Yield Premiums On Green Bonds?

Default risk and earnings expectations: The role of contract maturity in the credit default swap market

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