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We study the effect of credit default swaps (CDSs) on the bond market. Using a comprehensive sample of U.S. corporate bonds, we document that the presence of CDSs significantly increases bond liquidity and reduces yield spreads for investment grade bonds. We show that CDSs influence the bond market by lowering the impact of fire sales of institutional bondholders and facilitating inventory management for bond dealers who absorb fire sale shocks. However, the liquidity provision role of CDSs gets weakened after the CDS Big Bang in 2009, potentially because of the requirement of large upfront payments. [ABSTRACT FROM AUTHOR]

We confirm prior evidence that bonds on average are offered at prices below their immediate post-offer secondary market prices. However, in cases where banks lead–manage their own bond offerings the underpricing is significantly less as compared with other non-self-marketed offerings. These findings are robust across various matched samples and selection models. Our results suggest that the bond offering process is characterized by substantive agency conflicts between shareholders of corporations (issuers) and underwriters. [ABSTRACT FROM AUTHOR]

A correction is presented to the article "The Macroeconomic Uncertainty Premium in the Corporate Bond Market" which appeared in the August 2021 issue.

A review of ALEX POLLOCK & HOWARD ADLER, SURPRISED AGAIN! THE COVID CRISIS AND THE NEW MARKET BUBBLE (2022) I approach phenomena that I don't understand with good cheer and [...]

Purpose: To investigate the role of domestic and foreign economic policy uncertainty (EPU) in driving the corporate bond yields in emerging markets. Design/methodology/approach: The study utilizes monthly data from January 2008 to June 2023 from the selected emerging economies. The data analysis is conducted using univariate, bivariate and multivariate statistical techniques. The study includes bond market liquidity and global volatility (VIX) as control variables. Findings: Domestic EPU has a significant role in driving corporate bond yields in these markets. The study finds weak evidence to support the role of the USA EPU in influencing corporate bond yields in emerging economies. Domestic EPU holds more weight and influence than the EPU originating from the United States of America. Research limitations/implications: The findings provide useful insights to policymakers about the potential impact of policy uncertainty on corporate bond yields and enable them to make informed decisions regarding economic policies that maintains financial stability. Understanding the relationship between EPU and corporate bond yields enables investors to optimize their investment decisions in emerging market economies, opens the scope for further research on the interaction between EPU and volatility and other attributes of fixed income markets. Originality/value: Focuses specifically on the emerging market economies in Asia, providing an in-depth analysis of the dynamics and challenges faced by these countries, Explores the influence of both domestic and the USA EPU on corporate bond yields in emerging markets, offering valuable insights into the transmission channels and impact of EPU from various sources. [ABSTRACT FROM AUTHOR]

We develop a stylized model that generates the following empirical predictions: the less (more) accessible the underlying market is ex ante , the more its liquidity improves (deteriorates) when basket trading becomes available. We empirically test these predictions using corporate bonds before and after the introduction of exchange-traded funds. Consistent with the model's prediction, liquidity improvement is larger for highly arbitraged, low-volume, and high-yield bonds, and for 144A bonds to which retail investor access is prohibited by law. Our article leads to a more nuanced understanding of the impact of basket security introduction than previous research suggested. [ABSTRACT FROM AUTHOR]

Using breadth of corporate bond fund ownership to proxy for the combination of short-sale constraints and divergence of opinions in the corporate bond market, this paper investigates whether and to what extent Miller's overpricing theory holds for corporate bonds. Consistent with the theory, we document a significant and positive relation between changes in breadth and the cross-section of future corporate bond returns. Because of the bounded upside of debt, the ability of changes in breadth to predict returns appears to be less pronounced for corporate bonds relative to stocks. Furthermore, this predictability is stronger among bonds with higher credit risk, indicating that the effect of short-sale constraints and divergence of opinions on bond mispricing tends to be larger for riskier bonds with more upside potential and, thus, more scope for overvaluation. This paper was accepted by Lukas Schmid, finance. Supplemental Material: The internet appendix and data are available at https://doi.org/10.1287/mnsc.2023.4950. [ABSTRACT FROM AUTHOR]

Banks are the engine of providing financial resources in the economy and have special importance for governments. Accordingly, presenting the factors and components affecting financing restrictions and changes in the corporate debt bonds yield, risk management, as well as changes in their stock prices, in terms of bank management and from a macroeconomic perspective, can be considered as the leader of the economy and government. On the other hand, the proper management of banking challenges and the improvement of factors affecting the efficiency and effectiveness of banking resources can move the economic cycle in the right direction, considering that the banks’ primary activity is to grant loans and provide them to applicants. Accordingly, the researcher addressed the effect of the ability to manage political relations and financial crises on performance improvement. Therefore, a combination of Data Envelopment Analysis (DEA) and Two-Stage least squares (2SLS) regression analysis was used. This study is descriptive research with the correlational and post-event approach. In this way, the information about 11 banks in a period of 9 years (2014- 2023) was analyzed. The results showed that the improvement of ability level and proficiency in bank management will lead to the improvement of financing constraints, changes in corporate bond yield, and the growth rate of stock and non-shared incomes. The management authority not only affects credit risks, credit risk management and liquidity risk but also does not affect the stock price drop. [ABSTRACT FROM AUTHOR]

Featured Application: This research has important applications in areas such as smart furniture and human-computer interaction. It will bring people a more efficient and comfortable living experience as well as a new smart experience.  Human action recognition has many application prospects in human-computer interactions, innovative furniture, healthcare, and other fields. The traditional human motion recognition methods have limitations in privacy protection, complex environments, and multi-person scenarios. Millimeter-wave radar has attracted attention due to its ultra-high resolution and all-weather operation. Many existing studies have discussed the application of millimeter-wave radar in single-person scenarios, but only some have addressed the problem of action recognition in multi-person scenarios. This paper uses a commercial millimeter-wave radar device for human action recognition in multi-person scenarios. In order to solve the problems of severe interference and complex target segmentation in multiplayer scenarios, we propose a filtering method based on millimeter-wave inter-frame differences to filter the collected human point cloud data. We then use the DBSCAN algorithm and the Hungarian algorithm to segment the target, and finally input the data into a neural network for classification. The classification accuracy of the system proposed in this paper reaches 92.2% in multi-person scenarios through experimental tests with the five actions we set. [ABSTRACT FROM AUTHOR]

Bakong (Hanguana malayana (Jack) Merr.) is a perennial herbaceous plant that grows abundantly in certain parts of the Philippines. This study investigates Bakong fibers' potential as a pulp source for papermaking. Furthermore, microfibrillated cellulose (MFC) produced from the fibers was used as an additive in the Bakong fiber-based hand sheets at 2%, 6%, and 10% w/w, and their effects on their strength properties were observed. The soda pulping method produced Bakong pulp with a total yield of 47.36%. Proximate chemical analysis showed that the method reduced the lignin content from 13.19% to 8.76%, and the resulting pulp was successfully formed into paper hand sheets. The strength properties of the hand sheets were tested, and the resulting burst index, tear index, tensile index, and folding endurance values were 5.98 kPa/m2·g, 6.41 mN·m2/g, 105.97 N·m/g, and 626 double folds, respectively. Aside from the tear index, the Bakong hand sheets' strength properties were much higher than that of locally produced commercial printing paper. The addition of MFC on the hand sheets negatively affected the burst and tensile index values of the Bakong hand sheets but significantly improved the tear index up to 6% w/w. These results show that the pulp produced from the Bakong fibers can potentially be used as an alternative source of pulp for papermaking, but further optimization of the pulping process is recommended to increase the yield, lower lignin content, and improve compatibility with the MFC. [ABSTRACT FROM AUTHOR]

• We assess the impact of herding/anti-herding on stock-bond correlations in the US. • We find that corporate bonds exhibit herding and stocks anti-herding. • Both these patterns dampen the correlation between US stocks and corporate bonds. • This effect is largely noise-driven in nature. • High uncertainty, optimism and economic outperformance strengthen this effect. We examine investors' herding/anti-herding behavior in the US stock and corporate bond markets and their impact on stock-bond return correlation. Corporate bonds exhibit herding, with stocks displaying anti-herding. Bond herding and stock anti-herding are weakly related, with each significantly dampening the stock-bond return correlation. This effect is largely driven by their irrational components, affecting mostly the correlation of noise-driven stock and bond return elements, more so during periods of elevated uncertainty, optimistic sentiment and excessively positive economic performance. As the irrational forces in each asset class (stocks; bonds) countervail each other, this implies greater stability and resilience for the financial system. [ABSTRACT FROM AUTHOR]

We examine the impact on bond credit ratings of reduced information processing costs from two investor interactive platforms in China, i.e. 'Easy Interaction' and 'e-Interaction'. These online platforms provide investors with a channel to directly communicate with listed companies and learn much of corporate operations. Replies and explanations from management assist investors in integrating disclosed information and reducing information processing costs. The reduced costs likely impose reputational concerns on credit rating agencies (CRAs), leading to more stringent rating standards and less rating inflation. We find that more interactions result in lower credit ratings of corporate bonds. This effect is more pronounced for bonds rated by global-partnered CRAs and bonds whose issuers have higher information complexity, and less pronounced for bonds whose issuers have official consultation websites. Further analyses show that reduced information processing costs are associated with more information contents in rating downgrades and timelier ratings. Our findings provide evidence for the disciplinary effect of reduced processing costs on CRA behavior. [ABSTRACT FROM AUTHOR]

Using samples of corporate bonds issued by Chinese A-share firms from 2014 to 2021, we examine whether information about bond defaults transmits to other bonds underwritten by a common underwriter. We document that during the underwriting process for a new corporate bond, if any prior bonds underwritten by the same underwriter have defaulted, the yield spread of the new corporate bond increases significantly. Specifically, such a new bond, on average, has a yield spread that is 16.8 basis points higher than one without a common underwriter. The results suggest that investors perceive the default risk of a new bond increases due to a deteriorated reputation of the underwriter. Additional analyses suggest that the adverse effect of the new bond yield spread is less salient when an underwriter has a strong reputation, is state-owned, or has foreign shareholding; the issuer is state-owned or dual listed overseas. Overall, default information in the bond market transmits through common underwriters. [ABSTRACT FROM AUTHOR]

Reaching for yield, which we define as an investor preference for higher-yield bonds at a given rating or for higher-rated bonds at given yields, is associated with inflated valuation and thus negatively predicts risk-adjusted returns. Controlling for ratings, alphas are lower for higher-yield bonds, whereas, controlling for yields, alphas are lower for safer-looking, higher-rated bonds. Future bond returns are particularly low when current interest rates are low and demand from yield-reaching investors increases. These bonds experience more frequent downgrades and defaults, suggesting that they are riskier despite their high valuation. This paper was accepted by Victoria Ivashina, finance. Supplemental Material: The e-companion and data are available at https://doi.org/10.1287/mnsc.2023.4920. [ABSTRACT FROM AUTHOR]

Copyright of Journal of Engineering Management / Gongcheng Guanli Xuebao is the property of Journal of Engineering Management Editorial Office and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Journal of International Business Studies is the property of Springer Nature and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Green bonds have become a vital financial instrument to promote green development globally in the face of various environmental challenges. This paper investigates the impact of China's A-share listed companies' green bond issuance on ESG performance and the potential mechanisms from 2011–2021, using propensity score matching and double difference method (PSM-DID). The study finds that green bonds improve corporate ESG performance by enhancing environmental information disclosure, encouraging green innovation, and improving green reputation. Moreover, heavily polluting industries benefit more from green bond issuance in terms of ESG performance improvement. These findings contribute to understanding the benefits of green bond market in developing countries. [ABSTRACT FROM AUTHOR]

With systematic reinvestment of the cash flows generated by a bond portfolio, investors can modify their portfolios' exposure to different risk factors. They can also use this mechanism to design a flexible, smooth, yet low-cost strategy—a "glidepath"—to direct their portfolios toward their medium- and long-term objectives. Focusing on climate objectives, we introduce net-zero glidepaths (NZGps) and show how bondholders can devise NZGp portfolios that are consistent with their security-selection processes and compliant with their financial mandates. We present possible solutions for NZGps for two of the largest groups of corporate-bond investors: buy-and-hold and index-following investors. The simulated NZGp portfolios achieved their interim net-zero emission targets with a relatively small impact on their performance. They also remained compliant with the financial constraints, including duration and income targets, credit allocations, and issuer and sector concentrations. [ABSTRACT FROM AUTHOR]

Our article contains three critical elements. First, by way of motivation, we consider active optimal mean-variance portfolios within the confines of a three-risky-asset model (based on common equity, corporate bonds, and long-dated Treasury securities) and a short-term, riskless security. Within that context, our article models and numerically demonstrates the impact of the magnitude and sign of the interest-rate term premium in optimal asset allocation. Then, based on interest-rate survey data, we demonstrate the occurrence of a negative term premium in the Treasury market, and proceed to permit such an occurrence within a model whereby asset returns covary with a market portfolio. Finally, turning to empirics, we document the relationship between the sign of the term premium and the sign of the covariance between Treasury and equity returns. Recognizing the deficiency in using historical data as inputs to active optimal mean-variance portfolios, we seek to obtain forward-looking inputs to render our model prospective (rather than merely retrospective): we design and implement tests for obtaining forward-looking measures of covariation. [ABSTRACT FROM AUTHOR]

This research is to now the determinant of DER and the implication toward YTM and Economic growth in Banking Sector on The Indonesian Stock Exchange. The research sample is 22 Bond Series which are banking companies listed on the Indonesia Stock Exchange for the 2019-2023 period. Methods of data analysis using panel data regression method. The empirical results of the first model show that Profitability (ROA), Firm Size (SIZE), and Interest Rate (IR) have a positive effect on Capital Structure (DER), while the Exchange Rate (FOREX) has a negative effect. Liquidity (CR) has no effect on DER. All independent variables consisting of; ROA, CR, SIZE, FOREX and IR together significantly influence DER. The goodness-of-fit test as measured by the termination coefficient (R2) shows a coefficient of 0.937202, meaning that the variation in the ups and downs of the DER can be explained by ROA, CR, SIZE, FOREX, and IR of 93.72 percent, while the rest, namely 6.28 percent can be explained by other variables not examined in this research model. For the adjusted coefficient of determination (R2 adjusted) the coefficient is 0.9217. The second model shows that the DER and IR variables have a negative effect on Yield to Maturity (YTM), while the SIZE and FOREX variables have a positive effect. ROA and CR variables have no effect on YTM. All variables DER, ROA, CR, SIZE, IR and FOREX together affect YTM. For the goodness-of-fit test as measured by the termination coefficient (R2) shows a coefficient of 0.6750, which means that the variation in changes in the rise and fall of YTM can be explained by; DER, ROA, CR, SIZE, IR, and FOREX are 63.30 percent, while the remaining 36.70 percent can be explained by other variables outside this research model. [ABSTRACT FROM AUTHOR]

The commercial bill, as a regulated commercial credit mode, offers better creditor protection, more financing channels, and stronger bargaining power in financing. This paper creatively constructs bills receivable index in the micro level of enterprises and examines the potential impact of billing of accounts receivable on the financing constraints faced by enterprises. This paper also explores the mechanism that causes the impact and check whether the establishment of the Shanghai Commercial Paper Exchange Corporation (SHCPE) has had positive effects. The results show that billing can alleviate the financing constraints of enterprises due to its benefits offered by the commercial bill. Furthermore, the establishment of the Shanghai Commercial Paper Exchange Corporation (SHCPE) can lead to the development of a standardized and transparent bill market, further alleviating the financing constraints. The study also reveals that billing of accounts receivable affects financing constraints mainly by enhancing the quality of debt-like assets and reducing information asymmetry between enterprises and the outside world. For enterprises with longer maturity structure, the effect of billing on the alleviation of financing constraints is more significant. [ABSTRACT FROM AUTHOR]

Copyright of Majalat Monazaat Al-Aamal is the property of Majalat Monazaat Al-Aamal and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Leveraging the availability of a large panel of signed trade data in the corporate bond market, we explore how machine learning methods can be used to improve upon standard trade direction classification methods in markets in general, both with and without pre-trade transparency. Using the signed data set allows us to show how both the trading and information environment at the time of the trade critically affect the accuracy of existing trade classification rules in general and also illustrate the importance of optimizing the feature set in correctly classifying trade direction. These insights extend to the equity market. [ABSTRACT FROM AUTHOR]

By exploiting the first public bond default event in China—the Chaori bond default in 2014—we examine how implicit government guarantees shape the role of media information in bond pricing. We find an insignificant association between preissuance media tones and bond issuances' yield spreads before the event; however, the association becomes negative and significant after the event. The role of media tone in bond pricing is more pronounced for regions with greater information demand for default risk and for media outlets with stronger information provisions toward implicit government guarantees after the event. Mechanism analyses suggest increased bond investors' risk awareness, rather than strengthened information provisions in media tones, as the force behind the more pronounced role of media tone in bond pricing. Finally, lower yield spreads driven by more positive media tone do not suggest bond overpricing. Our study reveals the role of media tone in bond pricing and displays the evolution of the media tone's role in bond pricing due to changing institutions. [ABSTRACT FROM AUTHOR]

We investigate the relation between sovereign and corporate bond issuance. Sovereign bond issues that increase a country's maximum maturity are followed by increases in the maximum maturity of corporate issues. Our results point to issuance complementarities based on the benchmarking of corporate bonds to sovereign bonds. Sovereign and corporate bond issues are also substitutes, but substitutability requires the availability of a high-quality sovereign bond benchmark. By adding to existing theories focusing on substitutability, our findings highlight the role that the maturity of sovereign debt plays in capital market development. [ABSTRACT FROM AUTHOR]

The questions on long-term planning of an enterprise’ bonded loan interest rate payments have been studied. The methods have been considered and the classification of methods for planning the bonds interest rate proposed. Several groups of such planning methods have been singled out. The analysis of application of bond interest rate planning methods applied by enterprises of different national industries has been made. The analysis has been carried out in the spheres of mechanical engineering, generation, transmission and sales of electric power, ferrous metals production, transportation and logistics, foodstuffs production, and information transmission provision. Corporate bond issues issued between 2015 and 2020 have been analyzed. As a result, the three methods most frequently used by enterprises in planning bond interest rates have been identified: methods of considering the macroeconomic risk of an organization; methods of considering the combination of macroeconomic and individual risk of an organization; methods based on market analysis. The study of the mentioned methods allowed us to propose a method of planning the bond interest rate, which calculates the weighted average of the forecast bond interest rate. To assess the quality of the proposed method, it has been tested. The article concludes that it can be used at enterprises planning to issue their own bonded loans.

This article empirically analyzes the effect of foreign block acquisitions on U.S. target firms' credit risk as measured by their credit default swap (CDS) spreads. Foreign block purchases lead to a greater increase in the target firms' CDS premia post-acquisition compared to domestic block purchases. This effect is stronger when foreign owners are geographically and culturally more distant, and when they obtain majority control. The findings are consistent with an asymmetric information hypothesis, in which foreign owners are less effective monitors due to information barriers. [ABSTRACT FROM AUTHOR]

We examine the relationship between credit rating levels and rating agency fees in a public finance market in which rating agencies earn lower fees and face higher disclosure requirements relative to corporate bond and structured finance markets. Controlling for variation in the complexity of credit analysis at the issue level, we find evidence that rating agency conflicts of interest distort credit ratings in the municipal bond market. Unexpectedly expensive ratings are more likely downgraded, and inexpensive ratings are more likely upgraded. The relationship between credit ratings and rating agency fees is driven by issuers who lose access to AAA insurance. [ABSTRACT FROM AUTHOR]

The average maturity of newly issued corporate bonds has declined substantially over the past 40 years, and the traditional determinants of debt maturity fail to explain this decline fully. We show that the changing composition of investors in the corporate bond market influences bond maturities. The results of a Granger causality test, an instrumental variable approach, and a natural experiment suggest that a decline in the insurance companies' – which prefer long-term bonds – ownership share in the corporate bond market explains a significant part of the unexplained maturity decline. These findings illustrate how investor preferences can have real effects on corporations. [ABSTRACT FROM AUTHOR]

We synthetically create option contracts on a corporate bond index using CDX swaptions, overcoming the limitations that stem from the lack of traded corporate bond options. Our approach allows us to estimate forward-looking moments concerning the corporate bond market in a model-free manner. By constructing an aggregate volatility measure and the associated variance risk premium, we examine the role of volatility risk in the corporate bond market. We highlight that the ex ante conditional second and higher moments we estimate from synthetic corporate bond options carry important implications for credit risk models, providing an extra basis for testing their validity. [ABSTRACT FROM AUTHOR]

This study analyzed a hypothetical fixed-index annuity (FIA) contract linked to a 5 percent volatility-controlled index (VCI) and compared its performance with a traditional FIA linked to the S&P 500 Index, the stock benchmark itself, and a corporate bond benchmark. The simulation results showed that the FIA linked to the 5 percent VCI outperformed the traditional FIA, the bond benchmark, and enjoyed a higher sharp ratio than the stock benchmark. Risk parity, VCI, and the other factors contributing to the outperformance were studied. [ABSTRACT FROM AUTHOR]

Against the backdrop of the gradually exposed credit bond default risk in China, how to accurately identify and efficiently warn of corporate bond default risk has become a key concern for both academia and practice. To effectively solve a series of key problems in the traditional credit risk warning model, such as insufficient warning performance, single optimization target of hyperparameters, and weak model interpretability, this study integrates machine learning algorithms such as LightGBM, NSGA- II, and SHAP to constructs a LightGBM-NSGA- II-SHAP for early warning of corporate bond default risk, and empirically analyzes and tests the warning performance of the proposed model. The research results show that the warning accuracy of the proposed model exceed 85%, and compared with traditional machine learning models, the warning performance of the proposed model in this study is more excellent. In addition, the impact of visualization of warning features on warning results is demonstrated through the SHAP algorithm, and it is found that coupon interest rate, profit margin on fixed assets, total issuance, and receivable turnover etc. are the key features for identifying corporate bond defaults. [ABSTRACT FROM AUTHOR]

Evaluation of physical and mechanical heterogeneity in commercial paperboards is needed to promote their use in structural applications, especially within the field of packaging. Understanding the range of their behaviors is needed to compete with other materials in the current marketplace and expand in others. This work describes the physical and stiffness heterogeneities of twelve commercial materials using tensile tests in the cross-machine direction and several inverse analyses. The effects of grammage, thickness, and apparent density on tensile stiffness were evaluated in both the linear elastic and nonlinear regimes. Thickness and density provided the best explanation for elastic heterogeneous behavior in most of the materials; local grammage was not the best descriptor for any material. The analyses used here were not able to provide a good explanation of the nonlinear behavior, which was attributed to the development of large shear strains within the materials as they neared failure. This work provides a methodology for additional heterogeneous behavior examinations. [ABSTRACT FROM AUTHOR]

International financial integration exposes countries to external shocks. This paper identifies the impact and transmission of global financial risk (GFR) shocks to emerging market economies (EMEs). Heightened GFR significantly raises EME borrowing costs and lowers equity returns, reducing domestic economic activity. We document a novel transmission channel of GFR shocks to EMEs via international capital flows. Countries experiencing larger capital inflows are more affected by GFR fluctuations. Exploring the transmission through capital flows, GFR shocks affect EMEs mainly through their effect on equity returns, instead of country spreads. We show that equity returns contain more information about EME macroeconomic fluctuations than sovereign and corporate bond spreads. [ABSTRACT FROM AUTHOR]

Little is known about how executive gender shapes the inherent conflict of interest between shareholders and bondholders. Using a sample of almost 100,000 unique bond‐year observations, this study investigates how the appointment of female chief executive officers (CEOs) lowers the default outlook. Our evidence indicates that bond yield and bond volatility are significantly lower after a female takes the helm at a firm. This executive gender effect remains highly statistically and economically significant across various robustness checks and after addressing endogeneity concerns. Female CEOs lower the default risk component of the bond yield but have no material impact on the liquidity component. Subsample analysis substantiates the conditional effect of female CEOs on bond yield and bond volatility. Our evidence indicates that female CEOs' risk‐averse attributes pass through the credit risk and information asymmetry channels. [ABSTRACT FROM AUTHOR]

The high costs of disclosing confidential information lead firms with proprietary information to prefer private debt (bank loan) to public debt (corporate bond). We provide empirical evidence supporting this proposition using the staggered adoption of the inevitable disclosure doctrine (IDD) by US state courts that exogenously increased the value of proprietary information. The focal firms are significantly less likely to issue bonds after the IDD adoption. Financing through public debt decreases more for firms in which the protection of proprietary information is relatively more important. [ABSTRACT FROM AUTHOR]

It is well known that interest rates and credit spreads are negatively correlated. Any successful model for pricing callable corporate bonds has to take this correlation into account. A new approach for the analysis of corporate bond options is developed by using two correlated geometric Brownian motion (GBM) processes for the spread and interest rate components of corporate bond yields. Analysis of the results and comparison with market prices suggest that the traditional methods of calculating the option premium overestimate the value of the call option. Our analysis can also explain why risk neutral credit spreads are significantly wider than implied by default probability and in fact justify higher spreads. [ABSTRACT FROM AUTHOR]

This study investigates the determinants of trading activity in the U.S. corporate bond market, focusing on the effects of Seasonal Affective Disorder (SAD) and macroeconomic announcements. Employing the General-to-Specific (Gets) Autometrics methodology, we identify distinct behavioral responses between retail and institutional investors to SAD, noting a significant impact on retail trading volumes but not on institutional trading or bond returns. This discovery extends the understanding of behavioral finance within the context of bond markets, diverging from established findings in equity and Treasury markets. Additionally, our analysis delineates the influence of macroeconomic announcements on trading activities, offering new insights into the market's reaction to economic news. This study's findings contribute to the broader literature on market microstructure and behavioral finance, providing empirical evidence on the interplay between psychological factors and macroeconomic information flow within corporate bond markets. By addressing these specific aspects with rigorous econometric techniques, our research enhances the comprehension of trading dynamics in less transparent markets, offering valuable perspectives for academics, investors, risk managers, and policymakers. [ABSTRACT FROM AUTHOR]

This study examines the performance of worldwide corporate sustainability bonds issued from 2014 to 2020. Unlike traditional bonds, the proceeds of sustainability bonds are utilised for financing projects to bring about environmental and socio‐economic benefits. We analyse the short‐term market reaction to announcements of sustainability and traditional bond issuance and document that the stock market reaction to an announcement of sustainability bonds is stronger than that for traditional bonds. We also find that multiple issuers of sustainability bonds achieve a more favourable market reaction than single issuers. Finally, we examine if environmental, social and governance (ESG) scores can positively and significantly impact the corporate performance of firms through the lens of sustainability bond issuances. We find that ESG scores are the primary performance drivers for firms, and the effect is more pronounced for firms that issue sustainability bonds. Overall, the results suggest that issuers of sustainability bonds show their commitment towards environmental and societal goals and thus benefit from favourable stock market reactions. [ABSTRACT FROM AUTHOR]

We document significant increases in bond market liquidity around earnings announcements. These increases are attributed to decreased search and bargaining costs, which arise from the over‐the‐counter (OTC) nature of bond markets and outweigh increases in information asymmetry during these periods. Our evidence traces reductions in search and bargaining costs to two sources around earnings announcements: (1) improved access to dealers and (2) increased participation from institutional investors, who can more easily transact with multiple dealers. Overall, our findings highlight a novel channel through which firm‐specific information affects asset prices. [ABSTRACT FROM AUTHOR]

We investigate the financing and performance of international entrepreneurship in an environment that was characterized by severe information problems and very weak investor protection. Despite these problems, new ventures could raise large amounts of equity and debt on the Belgian capital market between 1890 and 1914. Many of these firms were international new ventures (INVs) with their main operations abroad, often far away from Belgium. We find that INVs raised much more capital but were less likely to pay a dividend than domestic new ventures (DNVs). They were less likely to issue a bond and had a higher cost of debt when operating further away from Belgium. Performance after listing was generally bad for new ventures throughout the period, but it was much worse for INVs than for DNVs. Our findings confirm contemporary arguments that unprotected, financially illiterate investors were expropriated by INV founders. [ABSTRACT FROM AUTHOR]

Purpose: This paper originally proposed the fuzzy option pricing method for green bonds. Based on the requirements of arbitrage equilibrium, this paper draws on Merton's corporate bond option pricing model. Design/methodology/approach: Describing the asset value behavior of green bond issuing enterprises through diffusion-jump processes to reflect the uncertainty brought by carbon emission reduction policies and technologies, using approximation methods to get the analytical pricing formula and then, using a fuzzification technique of Choquet expectation under λ-additive fuzzy measures after considering fuzzy factors, the paper provides fuzzy intervals for the parity coupon rates of green bonds with different subjective levels for investors. Findings: The paper proposes and argues the classical and fuzzy option pricing methods in turn for both corporate ordinary bonds and green bonds, considering carbon risk or climate risk. It implements the scenario analysis varying with industry emission standards and discusses the sensitiveness of the related key parameters of the option. Practical implications: The fuzzy option pricing for the green bonds provides the scope of the variable equilibrium values, operational theoretical supports and some policy implications of carbon reduction and promoting green funding. Originality/value: The logic of introducing the fuzziness of the option pricing for the green bonds lies with considering the existence of fuzzy information about the project supported by the green bond and the subjectivity of investors and it also responds to changes in technological uncertainty and policy uncertainty in the process of "carbon peaking and carbon neutrality." [ABSTRACT FROM AUTHOR]

The relationship between ESG performance and equity returns has become a popular area of research, but the same is not yet the case for bond returns. In this paper, we explore whether incorporating ESG factors, beyond emissions into the bond portfolio investment process leads to under or out performance. We find that ESG investing in bond portfolios does not lead to over or under performance. In other words, you do not have to 'pay to do good'. Further, in the period since the Paris agreement, Energy sector bond portfolio returns are positively related to ESG factors. This finding aligns with the theoretical prediction of Pedersen, Fitzgibbons, and Pomorski (2020), namely, that the ESG-return relationship should become positive as investors become more aware of ESG risks and opportunities. Overall, we show that Bond investors can 'do well while doing good'. [ABSTRACT FROM AUTHOR]

Proponents of quantitative easing (QE) unconventional policy have rather overstated some evidence that structural time series models do not predict long‐term asset prices and yields as well as naive random walk forecasts, implying that predictions of price reversals cannot be profitable and, therefore, that QE effects are not transitory. Indeed, in this work we present evidence that naive models do not outperform structural vector autoregressive and Markov switching models in out‐of‐sample forecasting of corporate bond yields purchased by the European Central Bank, when the information set includes base money growth. It turns out that structural time series models provide additional information regarding the likelihood of price reversals, thus motivating investors to offset the effects of QE interventions if they perceive unconventional monetary policy regimes as temporary. [ABSTRACT FROM AUTHOR]

Financial market is expected to play an important role in transition towards more sustainable setup of the business environment. The European Commission published the EU’s Strategy for Financing the Transition to a Sustainable Economy in 2021, requiring the inclusion of environmental, social and governance considerations into investment decision making. Yet, small, open EU economies, such as Slovakia, are in a specific position when implementing this legal framework. For instance, Slovakia does not have any meaningful stock market to speak of, although its bond and collective investment markets perform better. To assess the adoption of sustainable finance elements and to assess the convergence on the Slovak bond market towards standard practice, we investigated current practices on the corporate bond market of nonfinancial corporations. We conducted our research through a review of corporate bonds prospectuses published during 2020-22, in which, to assess current market practices, we examined and evaluated selected criteria and indicators related to issuers and bonds and compared them. These criteria include for example issuer´s business and purpose of finance, form, yield, security, or transferability of bonds. We find that relevant variable criteria and indicators related to reviewed bonds, compared in our research, are similar, indicating that the market converged into a standard practice. Finally, we find almost no evidence of adoption of the sustainable finance elements although there are hints of market uptake of sustainable practices.

Recently (May 2022–January 2024), the yield on the 10-year Treasury rose +40%, and the yield on one-month commercial paper rose +520%. During this period, stocks did just fine, with the Top-100 up +26% and the S&P Industrials climbing +23%. The US economy also grew, with real GDP up +3.6%. Yet, S&P Utilities fell −13% and institutional-quality low-leverage core real estate declined by −17%. The original version of this article (based on May 2022 data) concluded that core institutional real estate was essentially immune to rising interest rates (or declining). But the data since May 2022 strongly suggest the opposite conclusion. This update provides a revised analysis, taking advantage of the data since May 2022 and fully incorporating the staggering interest rate increases since that date. [ABSTRACT FROM AUTHOR]

We identify fixed-income mutual funds as an important contributor to the unusually high selling pressure in liquid asset markets during the COVID-19 crisis. We show that mutual funds experienced pronounced investor outflows amplified by their liquidity transformation. In meeting redemptions, funds followed a pecking order by first selling their liquid assets, including Treasuries and high-quality corporate bonds, which generated the most concentrated selling pressure in these markets. Overall, the estimated price impact of mutual funds was sizable at a third of the increase in Treasury yields and a quarter of the increase in corporate bond yields during the COVID-19 crisis. [ABSTRACT FROM AUTHOR]