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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]

Purpose: The fundamental theory of Modigliani and Miller (1958) states that a firm's financing decisions are independent from the firm's value. Nevertheless, several empirical studies as well as theoretical approaches from the past decade impugn this relation for real markets with their immanent inefficiencies. However, these questions are rather than academic in nature: Especially the influence of macroeconomic conditions on the market perception of debt issues is from high economic importance, since the need for new liquidity usually becomes even more urgent when the economic conditions worsen. Design/methodology/approach: This paper analyzes the reaction of shareholders to the issue of debt by Latin American firms under special consideration of the macroeconomic sentiment. To do so, a sample of debt issued by Latin American companies between 2003 and 2010 is empirically examined through an event study. Findings: The authors empirically demonstrate that specifically in Latin America, debt issuing companies show a significant underperformance during recessionary periods and an overperformance during nonrecessionary periods. These findings differ from previous results for mature capital markets. The authors conclude that not only the overall economic conditions matter to explain stock market reactions on bond issues but also the maturity of the corporate debt market plays an important role. Originality/value: The authors provide first evidence that the previously described changes in the returns on specific stocks depending on the economic sentiment (Baker and Wurgler, 2006) are under certain conditions also present in the market for corporate debt. [ABSTRACT FROM AUTHOR]

The paper focuses on liquidity risk of corporate bond, and it collects panel data from 2014 to 2018 in Corporate bond Exchange center in China. It measures liquidity by issued amount, trading turnover, squared price return, volume and bond age. In the regression Squared price return is significant, and the squared price return could indicate to what extent the bond is underpriced. At the same time, corporate bond trading volumes increase, but liquidity risk premium decreases, so the corporate bond spread decreases. Also, the large issued amount indicates high liquidity. In the paper, it finds that the threshold of 12 months is the best in corporate bond market in Exchange in China, and the liquidity risk premium which presented by age is a very important part in corporate bond spread. The results above are consistent with the hypotheses. But in the regression, the variable of corporate bond trades is positively correlated with corporate bond spread, and it’s different from the null hypothesis. It infers that there’re several reasons, maybe too much missing data in the sample or the samples are in an economic crisis period. Overall, issued amount, squared price return, volume and trading turnover are proxies of liquidity risk, however they are less important than bond age. [ABSTRACT FROM AUTHOR]

This paper investigates the incentive of credit rating agencies (CRAs) to bias ratings using a semiparametric, ordered-response model. The proposed model explicitly takes conflicts of interest into account and allows the ratings to depend flexibly on risk attributes through a semiparametric index structure. Asymptotic normality for the estimator is derived after using several bias correction techniques. Using Moody's rating data from 2001 to 2016, I found that firms related to Moody's shareholders were more likely to receive better ratings. Such favorable treatments were more pronounced in investment grade bonds compared with high yield bonds, with the 2007–2009 financial crisis being an exception. Parametric models, such as the ordered-probit, failed to identify this heterogeneity of the rating bias across different bond categories. [ABSTRACT FROM AUTHOR]

Credit default swaps (CDS) have been growing in importance in the global financial markets. However, their role has been hotly debated, in industry and academia, particularly since the credit crisis of 2007-2009. We review the extant literature on CDS that has accumulated over the past two decades. We divide our survey into seven topics after providing a broad overview in the introduction. The second section traces the historical development of CDS markets and provides an introduction to CDS contract definitions and conventions. The third section discusses the pricing of CDS, from the perspective of no-arbitrage principles, structural, and reduced-form credit risk models. It also summarizes the literature on the determinants of CDS spreads, with a focus on the role of fundamental credit risk factors, liquidity and counterparty risk. The fourth section discusses how the development of the CDS market has affected the characteristics of the bond and equity markets, with an emphasis on market efficiency, price discovery, information flow, and liquidity. Attention is also paid to the CDS-bond basis, the wedge between the pricing of the CDS and its reference bond, and the mispricing between the CDS and the equity market. The fifth section examines the effect of CDS trading on firms' credit and bankruptcy risk, and how it affects corporate financial policy, including bond issuance, capital structure, liquidity management, and corporate governance. The sixth section analyzes how CDS impact the economic incentives of financial intermediaries. The seventh section reviews the growing literature on sovereign CDS and highlights the major differences between the sovereign and corporate CDS markets. In the eight section, we discuss CDS indices, especially the role of synthetic CDS index products backed by residential mortgage-backed securities during the financial crisis. We close with our suggestions for promising future research directions on CDS contracts and markets. [ABSTRACT FROM AUTHOR]