Which factors affect corporate bonds pricing? Empirical evidence from eurobonds primary market spreads

Gabbi, Giampaolo; Sironi, Andrea

doi:10.1080/1351847032000143422

Cited by 79 publications

(54 citation statements)

References 9 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…Rating dummies are defined with respect to bonds rated AA and AAA. In accordance with the findings of Gabbi and Sironi (2005), we find that bond spreads rise significantly with lower credit ratings and higher coupons, and that bond size is not a significant determinant of bond spreads. However, in contrast with Gabbi and Sironi (2005) and with our expectations, bond spreads fall with higher maturity.…”

Section: Adjusting Bond Yields For Credit Risk and Liquiditysupporting

confidence: 79%

“…The yield-to-maturity of these bonds is adjusted for differences in credit risk before applying the convergence measures. In accordance with the findings of Gabbi and Sironi (2005), our empirical results suggest that the expected secondary market liquidity is not a significant determinant of primary market bond yields when liquidity is measured by bond size. Hence, despite finding evidence for a negative relationship between transaction issuance costs and bond size, there is no need to adjust the bond yields for liquidity.…”

Section: Introductionsupporting

confidence: 78%

“…5 The most important differences between our sample and model specification and those of Gabbi and Sironi (2005), hereafter abbreviated as GS, are as follows. First, our sample is restricted to bonds denominated in euros while the GS sample is restricted to Eurobonds but denominated in different currencies.…”

Section: Adjusting Bond Yields For Credit Risk and Liquiditymentioning

confidence: 99%

See 2 more Smart Citations

A Factor Analysis Approach to Measuring European Loan and Bond Market Integration

2009

View full text Add to dashboard Cite

By using an existing and a new convergence measure, this paper assesses whether bank loan and bond interest rates are converging for the non-financial corporate sector across the euro area. Whilst we find evidence for complete bond market integration, the market for bank loans remains segmented, albeit to various degrees depending on the type and size of the loan. Factor analysis reveals that rates on large loans and small loans with long rate fixation periods have weakly converged in the sense that, up to a fixed effect, their evolution is driven by common factors only. In contrast, the price evolution of small loans with short rate fixation periods is still affected by country-specific dynamic factors.There are few signs that bank loan rates are becoming more uniform with time.2

show abstract

Section: Adjusting Bond Yields For Credit Risk and Liquiditysupporting

confidence: 79%

Section: Introductionsupporting

confidence: 78%

Section: Adjusting Bond Yields For Credit Risk and Liquiditymentioning

confidence: 99%

See 1 more Smart Citation

A Factor Analysis Approach to Measuring European Loan and Bond Market Integration

2009

View full text Add to dashboard Cite

show abstract

“…The first goal of a firm's financing strategy is to achieve the desired rating from one of NRSROs, indicating financial soundness, efficiency of internal control systems and more general managerial competence, providing a good signal to the external environment (e. g. investors) through the level of CR (Cantor, 1994;Gonzalez, 2004). A number of researchers have illustrated the importance of CR in finance (for example, Sherwood, 1976;Kaplan and Urwitz, 1979;Belkaoui, 1983;Ederington et al, 1987;Pottier, 1998;Pottier and Sommer, 1999;Gabbi and Sironi, 2002;Gonzalez, 2004).…”

Section: A Brief Review Of Cr Literature Backgroundmentioning

confidence: 99%

Determinants and Impacts of Internal Credit Rating

Alkhawaldeh¹

2012

International Journal of Financial Research

View full text Add to dashboard Cite

This study enrich the research in the area of credit rating by adding supportive power to the explanation of using factors which have an influence on the CR. Such a power can increase the awareness of the current situation of CR as a subject in one of the developing countries that has unique political and economic characteristics. The results in summary confirm that firm characteristic variables have a significant impact on CR. Profitability is positively associated with CR for all models, while leverage and loss propensity are associated negatively with CR for all (or nearly all regarding loss propensity) models. However, capital intensity is not important. Only size and growth potential (Tobin's q) are very strongly positively associated with CR. By contrast, type of sector and audit are not related to CR.

show abstract

“…Gabbi andSironi 2005 andElton et al 2004), since they provide new information to stock markets (Hooper, Hume, and Kim 2005). The rating agencies try to assess the risk by employing an encompassing catalogue of measures.…”

Section: Assumption Regarding a Potential Influencementioning

confidence: 99%

Market Discipline and the Use of Government Bonds as Collateral in the Emu

Ullrich

2006

SSRN Journal

View full text Add to dashboard Cite

Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweise die Meinung des ZEW dar.Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp06046.pdf Non-technical SummaryThe confidence that financial markets can substantially restrict the debt behaviour of governments is not high. One reason for the lack of market discipline could be that the European Central Bank (ECB) accepts all government bonds of the EU governments at the same conditions as eligible for monetary policy transactions. A differentiation with respect to potentially varying risk levels is not given. This could support the idea that government bond in the EU are equally secure and have the same low default risk.The use of government bonds as collateral in monetary policy transactions with the ECB has declined since 1999. Even if the ECB has not yet excluded securities from the list of eligible assets, this list contains an explicit enumeration of eligible assets. All bonds issued from governments of the EU are contained in the class with the lowest risk, despite large differences in debt and deficit. The acceptance of all government bonds at the same conditions is not followed by the markets, as the ratings of private rating agencies show.The rating of the central bank and the rating of the private agencies can be seen as two signals about the default risk of government bonds. Because the central bank and the rating agencies are expected to devote a considerable amount of resources to the assessment of the default risk of government bonds, we assume that the institutions identify the risk correctly on average. However, the assessed risk will not be correct in any case.The extent to which rating signals affect investors' expectations about the default risk of government bonds will then depend on the relationship between the evaluation error of the institutions. An effect of the ECB classification of a government bond on the risk premium can only arise theoretically if the error of the ECB is independent from that of the rating agency. In case of unbiased signals of the ECB and the agency, and the ECB signal depending on that of the rating agency, investors would ignore the signal of the ECB.If financial markets see the ECB as an independent source of information with regard to the default risk of government bonds, the classification as eligible assets for monetary policy transactions could influence the risk premia of bonds. In this case, it could be that the registration as eligible assets of all government bonds of the EU leads to more uniform risk premia than without this signal. Market Discipline an...

show abstract

Which factors affect corporate bonds pricing? Empirical evidence from eurobonds primary market spreads

Cited by 79 publications

References 9 publications

A Factor Analysis Approach to Measuring European Loan and Bond Market Integration

A Factor Analysis Approach to Measuring European Loan and Bond Market Integration

Determinants and Impacts of Internal Credit Rating

Market Discipline and the Use of Government Bonds as Collateral in the Emu

Contact Info

Product

Resources

About