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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]

Abstract: During the recent credit crisis credit rating agencies (CRAs) became increasingly lax in their rating of structured products, yet increasingly stringent in their rating of corporate bonds. We examine a model in which a CRA operates in both the market for structured products and for corporate debt, and shares a common reputation across the two markets. We find that, as a CRA’s reputation becomes good enough, it can be optimal for it to inflate its ratings with probability one in the structured products market, but inflate its ratings with probability zero in the corporate bond market. [Copyright &y& Elsevier]

In recent years, financial markets have become increasingly integrated, both domestically and internationally. During past financial crises in emerging market economies it has been observed that spillover does not affect only different asset markets in the same countries, but also markets in other countries. The global financial crisis supports the evidence that increasingly integrated financial markets originate a large degree of co-movements across markets through shocks transmission. The analysis of the level of integration between financial markets can help to understand how financial crises, in a specific Country or in an economic area, can be transmitted to other countries. Understanding the growing international interconnection of asset prices requires a complete and comprehensive modeling of the transmission channel. The paper adopts a new methodology based on the identification of a structural VAR. The results yield some insights into the shocks transmission between international financial markets. Strong co-movements between the Euro area corporate bond market and the EMBIG indices seem to characterize the relationships between financial markets in Europe. The analysis also provides some evidence that the effect of a shock to the emerging markets on the mature ones is stronger than vice versa. [ABSTRACT FROM AUTHOR]

In this article, the dependence structure of the asset classes stocks, government bonds, and corporate bonds in different market environments and its implications on asset management are investigated for the US, European, and Asian market. Asset returns are modelled by a Markov-switching model which allows for two market regimes with completely different risk-return structures. Using major stock indices from all three regions, calm and turbulent market periods are identified for the time period between 1987 and 2009 and the correlation structures in the respective periods are compared. It turns out that the correlations between as well as within the asset classes under investigation are far from being stable and vary significantly between calm and turbulent market periods as well as in time. It also turns out that the US and European markets are much more integrated than the Asian and US/European ones. Moreover, the Asian market features more and longer turbulence phases. Finally, the impact of these findings is examined in a portfolio optimization context. To accomplish this, a case study using the mean-variance and the mean-conditional-value-at-risk framework as well as two levels of risk aversion is conducted. The results show that an explicit consideration of different market conditions in the modelling framework yields better portfolio performance as well as lower portfolio risk compared to standard approaches. These findings hold true for all investigated optimization frameworks and risk-aversion levels. [ABSTRACT FROM AUTHOR]

We consider the roles of monetary shocks and tightening credit market conditions in the transmission of South Korea's 1997 financial crisis to the real sector, and compare the relative impacts of these factors on production in light and heavy industries. Using structural regression equations, vector autoregressive models, and the accompanying dynamic forecasts, we find that the ratio of commercial bills dishonored to the total value of bills to be cleared can explain the decline in industrial production more fully than either the decline in the real stock of money or the spread between yields on corporate and government bonds. These results are most emphatic in light industry, for which small and medium-sized firms account for more than 70% of the total value added. Since fluctuations in the dishonored bills ratio may reflect components related to increases in the cost of credit intermediation and its effect on small and medium-sized firms more precisely than the corporate—government bond spread, we interpret the evidence as suggestive of a credit channel and ‘flight to quality’ at work. [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]