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A developed and vibrant corporate bond market provides an important means of financial resources to corporate, in addition to bank financing. It brings transparency and prudence into financial system and helps in minimizing risks in financial system through diversification. The main objective of this study is to find out the various issues and hurdles faced by retail investors and come out with appropriate suggestions in this regard. A modest attempt has also been made to understand the present status of the Indian corporate bond market in reference to retail investors participation. The study reveals that, in spite of sincere efforts of policymakers, the participation of retail investors in Indian corporate bond market are negligible. It has also been observed that the important issues of retail investors are related to safety of principal, returns, liquidity and tax benefits. It is expected that the suggestions made in this paper, if implemented, will definitely helpful in attracting retail investors to Indian corporate bond market.

developed and vibrant corporate bond market provides an important means of financial resources to corporate, in addition to bank financing. It brings transparency and prudence into financial system and helps in minimizing risks in financial system through diversification. The main objective of this study is to find out the various issues and hurdles faced by retail investors and come out with appropriate suggestions in this regard. A modest attempt has also been made to understand the present status of the Indian corporate bond market in reference to retail investors participation. The study reveals that, in spite of sincere efforts of policymakers, the participation of retail investors in Indian corporate bond market are negligible. It has also been observed that the important issues of retail investors are related to safety of principal, returns, liquidity and tax benefits. It is expected that the suggestions made in this paper, if implemented, will definitely helpful in attracting retail investors to Indian corporate bond 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]

A one-factor model based on long-run consumption growth explains the risk premiums on corporate bond portfolios sorted on credit rating, credit spreads, downside risk, idiosyncratic volatility, long-term reversals, maturity, and sensitivity to the financial intermediary capital factor. The estimated risk-aversion coefficient is lower when we use the consumption growth of wealthy households over a longer horizon as a risk factor, and a model with a 20-quarter horizon yields a risk-aversion coefficient of 15, a value similar to the one estimated from equity portfolios. This paper was accepted by Bruno Biais, finance. Funding: Y. Nozawa acknowledges funding from the Center for Investing at the Hong Kong University and Science and Technology. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4784. [ABSTRACT FROM AUTHOR]

This paper studies a model proposed by Baaquie (Phys A Stat Mech Appl 541:123367, 2020b) for which a corporate bond pays coupons that are stochastic—depending on the valuation of the issuer. It is shown that by considering bonds with stochastic coupons that are 'equivalent' to fixed coupon bonds (defined in the paper), the price of the fixed coupon bond can be accurately explained. The proposed model of stochastic coupons has a built-in hedge for the issuer—and has the feature of profit and loss sharing between investor and issuer making it a viable instrument for Islamic finance. [ABSTRACT FROM AUTHOR]

In this paper we collect data of corporate bonds and government bonds issued from 2005 to 2019 from CSMAR database. Firstly, we make a stepwise regression analysis and research on the impact of climate risk, selling back and cross-market transaction on corporate bond yield. The impact of climate risk on corporate bond yield is positive because if carbon dioxide emission is more, the earth will be warmer and sea levels will be higher, then companies will face more climate risks and corporate bond yields will increase. The impact from the selling back on corporate bond yield is negative because if the bond can be resold, the risk will be lower and the bond yield will decrease. The impact of cross-market transaction on corporate bond yields is positive because if corporate bonds cannot be traded, the liquidity of corporate bonds will be low, and the risk will increase, then corporate bond yield will increase. Secondly, logarithmic regression analysis of climate risk factors shows that the climate risk is still significant and the model fits well. Selling back, cross-market trading and other factors are significant, and the pattern is more significant. Compared with the original model, it can better explain corporate bond yield. [ABSTRACT FROM AUTHOR]

This paper proposes a procedure to measure firms' longitudinal accounting comparability and investigates whether it affects bond risk premiums. The results provide robust evidence that bonds of firms with more longitudinally comparable accounting information have lower credit spreads. This effect is stronger when the firms' financial performance is poor and for bonds with speculative credit ratings. Results also reveal that firms with less longitudinally comparable accounting information are more informationally asymmetric and do have a higher expected default probability. Finally, the effects of the longitudinal and the cross‐sectional comparability in reducing bond credit spreads are incremental to each other. [ABSTRACT FROM AUTHOR]

This study examines the key influencing factors of voluntary dual ratings selection in corporate bond financing and the effect of dual ratings on risk premium and default risk, based on corporate bond data issued from 2016 to 2021. It shows that the worse the bond issuers' credit qualifications, the more likely they are to seek dual ratings before issuance. Compared to a single credit rating, the risk premium for a bond with dual ratings is lower, and the effect becomes more significant in the low-rated and non-listed company samples. There are dual ratings before bond issuance, and the higher the average credit rating level of the bond, the lower the bond's default risk. The research findings provide a theoretical basis and empirical evidence for the practice of voluntary dual ratings in China, expand research on the influencing mechanism of bond issuance pricing in the context of voluntary dual ratings selection, and examine the information content of credit ratings from the perspective of their ability to predict bond default. [ABSTRACT FROM AUTHOR]

We define liquidity for corporate bonds as the expected waiting time to reduce a risk position. Our methodology addresses the fact that many bonds are liquidated quickly despite having few trades in the recent past. Building on research from the housing market, we apply survival analysis to bond holding times. We generalize across bond properties and market conditions to arrive at a liquidity measure for all corporate bonds, independent of how often they trade and whatever transaction costs they incur.

The estimate of the probability of default plays a central role for any financial entity that wants to have an overview of the risks of insolvency it may incur by having economic relations with counterparties. This study aims to analyze the calculation of such measure in the context of counterparty risk from a current and prospective standpoint, by using dynamic neural networks. The forecasting aspect in the calculation of such risk measure is becoming more and more important over time as current regulation is increasingly based on a "Through the Cycle" and not a "Point in Time" assessment, consequently giving fundamental importance to such estimate. To this end, three different models aimed at calculating the Probability of Default have been investigated: the CDS method, the Z-Spread method, and the KMV method (Kealhofer, Merton and Vasicek). First, the different techniques have been applied to one of the main suppliers of gas and energy in Italy as a reference company. Then, they have been applied to calculate the same risk measure on the 50 companies included in one of the most important European indices, the Euro Stoxx 50.

Copyright of Contaduría y Administración is the property of Facultad de Contaduria y Administracion-Universidad Nacional Autonoma de Mexico 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.)

This paper empirically studies a model for pricing risky corporate bonds proposed by Baaquie—based on the seminal Merton. The proposed model provides an exact solution for the price of a risky corporate bond with a finite maturity and explains the market price of corporate fixed coupon bonds as being the result of the market risk that is carried by the bond. Baaquie's model is empirically tested using 42 fixed coupon bonds issued by 23 US corporations, between 2011 and 2017. It is found that the proposed model estimates most bond prices quite accurately. Market time (similar to the concept of psychological time), which is distinct from calendar time, is quantified in the paper and is an exogenous behavioral parameter that plays a pivotal role in improving the accuracy of the pricing model for long‐maturity risky bonds. [ABSTRACT FROM AUTHOR]

The study examined the relationship between Stock Market Capitalisation and economic growth in Nigeria. Specifically, the study aimed at examining the effect of stock market corporate bond on gross domestic product in Nigeria, examining the effect of government securities on gross domestic product in Nigeria and determining the effect of equities on gross domestic product in Nigeria. Secondary data from 1991 to 2021 were sourced from the Central Bank of Nigeria Statistical Bulletin. Multiple Regressions were used to analyse the data collected and Minitab statistical package were used to present the results. Findings revealed that there was a negative correlation between dependent and independent variables. Findings revealed that there was an overall significant relationship between the dependent and independent variables. The study therefore recommends that Stock Exchange Market should encourage Nigerian Investors to have the habit of investing greatly in Government Securities; this will have a good effect on Gross Domestic Product. Nigerian Exchange Group should make the Investors know the beauty of Corporate Bonds. Investors should be encouraged by the stock exchange market to invest greatly in Equities in order to have a high impact on the value of Gross Domestic Product. [ABSTRACT FROM AUTHOR]

This paper analyzes bond price reactions to examine the information spillover from equity analysts' recommendation revisions into the bond market. We document a positive relation between bond price reactions and recommendation revisions. On average, bond prices react positively to recommendation upgrades and negatively to recommendation downgrades. The strongest reactions are observed among speculative‐grade bonds. While, on average, bond price movements are in the same direction as analysts' recommendation revisions, these revisions can also lead to bond price reactions in the opposite direction to share price reactions. We find evidence of negative bond return reactions relative to share price reactions among firms that are closer to distress, especially when they have high levels of institutional ownership or discretionary accruals. The negative relative price reaction between shares and bonds indicates that equity analyst recommendations sometimes carry security‐specific information. [ABSTRACT FROM AUTHOR]

This paper investigates the effect of market and liquidity risks on corporate bond pricing in Turkey, an emerging market, and in Europe. Results show that corporate bond returns have exposure to liquidity factors and not to market factors in both settings. Corporate bonds issued in Turkey have significant exposure to fluctuations in benchmark treasury bond liquidity and corporate bond market liquidity; while corporate bonds issued in Eurozone have exposure to equity market liquidity and are sensitive to fluctuations in a 10-year generic government bond liquidity. The total estimated liquidity risk premium is 0.7% per annum for Turkish “A” and above graded corporate bonds, and 1.08% for the last investment grade level (BBB-) long-term bonds. For Eurozone, the total liquidity risk premium is 0.27% for investment grade 5-10 year term bonds, 1.05% for high-yield 1-5 year term bonds and 1.02% for high-yield 5-10 year term category.

We provide direct evidence of how dealers' funding liquidity affects their liquidity provision in securities markets. Worse funding liquidity (higher repo haircuts and rates) leads to larger bid-ask spreads and transaction costs in corporate bonds. We also find that dealers' relationships with money funds are important determinants of their repo haircuts and rates. Using dealers' exposure to the 2016 Securities and Exchange Commission (SEC) money fund reform as an instrument, we show that funding liquidity indeed has a causal effect on market liquidity. Finally, dealers with lower funding liquidity tend to have smaller market shares and execute more trades on an agency basis. This paper was accepted by Haoxiang Zhu, finance. [ABSTRACT FROM AUTHOR]

Research background: The traditional function ascribed to a modern financial institution is to mobilize resources among the two units (surplus and deficit) of the economy. This can be achieved when financial institutions wake up to this responsibility and act as the pillar upon which other institutions can rely on.

To protect the interest of the investors, the corporate bond market in China has implemented a trustee system. However, before the first bond default happened in 2014, implicit government guarantee for the issuers ensured a market with zero default. In recent years, the rising amount of corporate bond defaults has ignited concerns about the credit risk and brings China's underdeveloped trustee system to authorities' attention. Based on the textual content of the trustee reports from 2013 to 2018, this paper examines the association between the textual content of trustee reports and the credit spreads. Results show that the extent of risk disclosure in trustee reports is positively correlated with the credit spreads. Furthermore, a higher positivity of the trustee reports is associated with lower credit spreads. These results reveal the monitoring and informational role of the trustees in China. Also, incremental explanatory power of the trustees lends support for improving corporate bond risk management. [ABSTRACT FROM AUTHOR]

This study informs the largely neglected literature on the probability of corporate bond issuance in African emerging markets by determining which firm-level variables – size, risk, profitability, tangibility of assets, leverage, growth opportunities, and age – influence private-sector firms' decision to issue bonds in the primary market. Using data for 49 non-financial firms – 32 bond issuers and 17 non-issuers – between January 2009 and December 2014, the pooled fractional probit regression technique is adopted with the Bernoulli quasi-maximum likelihood estimator (BQMLE) to identify risk, leverage, size, and age as the most important. The study further contributes to the literature by its finding that differences exist between corporate bond issuing and non-issuing firms in Africa. It recommends the need to foster the debt credit culture for the development of local debt markets on the continent. [ABSTRACT FROM AUTHOR]

We apply machine learning techniques to construct a series of models of corporate bond defaults. By combining Chinese accounting information and corporate bond data from January 2012 to December 2019, we construct an out-of-sample forecast that significantly improves the identification rate of corporate bond defaults, with an area under the receiver operating characteristics curve greater than 90 percent. Our models are robust to different machine learning models, including stacking, boosting, and bagging ensembling models. Our models consider cross-sectional heterogeneity, such as different ownership structures, accessibility to external finance, industry heterogeneity, different sample periods, and government policy impact. [ABSTRACT FROM AUTHOR]

We apply machine learning techniques to construct a series of models of corporate bond defaults. By combining Chinese accounting information and corporate bond data from January 2012 to December 2019, we construct an out‐of‐sample forecast that significantly improves the identification rate of corporate bond defaults, with an area under the receiver operating characteristics curve greater than 90 percent. Our models are robust to different machine learning models, including stacking, boosting, and bagging ensembling models. Our models consider cross‐sectional heterogeneity, such as different ownership structures, accessibility to external finance, industry heterogeneity, different sample periods, and government policy impact. [ABSTRACT FROM AUTHOR]

This study investigates the effect of shadow bank leverage on corporate bond returns. Using a unique dataset of Wealth Management Products (WMPs), we construct a new measurement of shadow leverage in the Chinese banking system. We find that the sensitivity of bond returns to the risk of shadow leverage has a negative effect on corporate bond returns. We propose a new three-factor bond pricing model by adding the factor of shadow leverage risk into the traditional two-factor model of Fama and French (1993. "Common Risk Factors in the Returns on Stocks and Bonds." Journal of Financial Economics 33: 3–56). A comprehensive empirical analysis shows that the proposed model fits corporate bond returns well and outperforms the two-factor bond pricing model, both in- and out-of-samples. Specifically, the shadow leverage risk factor makes greater marginal contributions in lower credit rating groups and more shadow leverage-sensitive groups. Overall, we highlight the importance of shadow banks in the role of asset pricing. [ABSTRACT FROM AUTHOR]

• Issuers' ESG scores negatively predict future bond short interest ratio. • Results are robust to controlling for various bond characteristics and using individual ESG pillar scores. • Changes in ESG scores can predict future changes in bond ratings. Bonds with declining ESG scores are more likely to have their ratings downgraded in the future, whereas those with improving ESG scores tend to be upgraded. This paper explores the effect of ESG ratings on corporate bond short interest. Using corporate bond data from 2006 to 2022, we show that higher issuers' ESG scores are associated with lower bond short interest. Further examination reveals that changes in ESG scores can predict future changes in bond ratings. Overall, our findings suggest that bond short sellers consider issuers' ESG scores as valuable indicators in making investment decisions. [ABSTRACT FROM AUTHOR]

This study aims to determine the factors, both financial and non-financial, which influence corporate bond and Sukuk ratings. The results will be useful for companies, investors or related parties as additional information and references for their investment decisions. Using ordinal logistic regression models with SPSS version 21 software, the study analyses the determinants of corporate bond and sukuk ratings listed on the Indonesia Stock Exchange (IDX) for the period 2013-2017. The variables employed are profitability, liquidity, leverage, company size, securities structure and maturity date. The results of the Wald test statistics show that leverage ratio, firm size, security structure, and maturity date are the factors that influence the probability of high or low corporate bond ratings, while profitability and liquidity ratios are factors that have no effect on the level of such ratings. With regard to sukuk, profitability, liquidity, and maturity date are the factors that influence the probability of high or low corporate sukuk ratings, while leverage ratio, company size, and security structure have no effect on the ratings.

In this paper, we study asymptotic behaviors of a free boundary raised from the evaluation of a corporate bond subject to credit rating changes of the underlying company. The credit rating migration is modeled by a free boundary which separates different credit rating regions in a state space. We first formulate the mathematical problem and then establish the well-posedness of the problem and the long time-to-expiry behavior of the solution. As a result, we describe the location and asymptotic line of the free boundary. We also provide certain numerical simulations. [ABSTRACT FROM AUTHOR]

Employing an event study approach, we examine 5,574 bond return reactions to unexpected quarterly dividend change announcements in the U.S. corporate bond market over the period 2002–2014. On average, bond price reaction is in the same direction as dividend changes, which supports the hypothesis that dividend changes signal future firm performance. However, the price reaction varies significantly in the spectrum of bond's risk. Importantly, we document that some bondholders react negatively to unexpected dividend increases, indicating a wealth transfer effect. Such wealth transfer effect is most likely to occur in very high risk bond approaching maturity issued by firms with a low level of cash and incorporated outside Delaware. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this paper is to investigate the effect of bond issuance announcements on share price returns in three emerging markets and examine the characteristics of bond issues that affect the abnormal share price returns of the company. Design/methodology/approach: This study employs event study, correlation and multiple regression techniques to attain the research objectives. The authors test hypotheses on 105 public listed companies from Malaysia, Singapore and Thailand, during the period of 2008–2014. Findings: The findings show positive cumulative average abnormal returns resulting from the announcement of corporate bond issuance for Malaysia, Singapore and Thailand. The results reveal that there is a significant effect of bond issuance announcements on share price returns. The results also disclose that the market is not efficient at its semi-strong form as proposed by the market efficiency hypothesis. Originality/value: The results provide better references for fund managers and investors in capital markets to take advantage of the abnormal returns resulting from bond issuance announcements. [ABSTRACT FROM AUTHOR]

Extensive studies in the literature of market microstructure are dedicated to either verifying the informational efficiency of the market or exploring the relationship of relative efficiencies across different markets. However, little work has been done to examine the relation between asset liquidity and institutional details of firm and management team. The key research question of this study is whether or not the intraday corporate bond liquidity is associated with corporate internal governance, a governance mechanism stemming from within the top management team, shortly before earnings announcements when the information asymmetry is heightened. Building on the theoretical model of internal governance, the paper uncovers a hump-shaped relationship between internal governance measure and corporate bond liquidity before earnings announcements. The empirical results are generally persistent across a battery of robustness checks such as sensitivity check, subsample test and aggregation analysis. I employ the 2008 financial crisis as the main identification strategy. In face of the exogenous shock upon internal governance measure, the hump shape relationship still holds. This novel study contributes to the literature of financial economics, corporate governance and market microstructure. The study also provides evidence in support of the argument that the corporate bond market is informationally efficient. [ABSTRACT FROM AUTHOR]

Weekly transaction data from 2016 to 2017 in Shenzhen and Shanghai Exchange platforms are collected for analyzing the volatility clustering effect of corporate bond yield spread. The volatility cluster characteristics of corporate bond yields are analyzed with cointegration by Autoregressive Conditional Heteroskedasticity models. Results show that tenyear period corporate bonds yield fluctuates most heavily. Corporate bond yields are proved to have volatility clusters and asymmetric characteristics. Thus, investors could choose different corporate bonds with different yield volatilities to maximize their returns. [ABSTRACT FROM AUTHOR]

This paper aims to study the dynamics of corporate bond yield spread in India, and attempted to identify the possible determinants: bonds' liquidity, credit quality and therefore their yield spreads. A large sample of daily corporate bond trade data over a period of 6 years (2011–2016), classified into Issuers Segment-wise and Rating-wise, are analyzed within a basic statistical framework and using panel regression model. Default risk, as captured by the credit rating, is found to significantly affect the yield spread, for all types of securities. Even if the summary statistics and panel regression results broadly support the relationship between bond liquidity, captured through various bond characteristics and trade statistics, and yield spread, use of better liquidity proxy measure may improve the said relationship. Movements in equity market also affect corporate bond yield spread in India. [ABSTRACT FROM AUTHOR]

In this paper, valuation a corporate bond with multi credit rating migration risks is considered under the structure framework by using a free boundary model. The establishment, analysis and calculation of the model are presented. Numerical scheme, stability of the numerical algorithm and convergence order are discussed. Calibration of the parameters and numerical examples are also suggested. Furthermore, the relationship between the value function, the free boundaries and different parameters is shown and analysed. [ABSTRACT FROM AUTHOR]

We develop a calibration methodology for default probability curves to bond and credit default swap (CDS) pricing. We consider the recovery of nominal (RON) policy and recovery of treasury (ROT) policy for the exposure at default (EAD) of bond pricing. The paper presents the results of calculations of possible profit and loss (PnL) on bond portfolio and CDS portfolio. [ABSTRACT FROM AUTHOR]

In this paper, we propose an overreaction detection method to capture price reversals in the momentum cycle. Motivated by the absence of the momentum effect in investment-grade (IG) bonds, which is uncommon for most financial assets, we verify the method by showing significant improvements in the refined momentum portfolios of U.S. IG bonds from January 1994 to June 2014. The subsample of private or public firms and the relation to investor sentiment also indicate price momentum for both non-investment-grade (NIG) bonds and IG bonds. Our results carry important consistency implications for price continuations across financial assets and markets. [ABSTRACT FROM AUTHOR]

Global Perspectives: The Corporate Bond Market has almost tripled in size globally between the years 2000 to 2013 ($49 Trillion in 2013). Expressed as a percentage of GDP, while the outstanding amount averaged 169% in the Developed countries, in the Emerging markets it was 24% only in 2013. Bank lending continues to dominate at 52% of the global corporate financing in 2012. However, in US and European Markets, Corporate Bond is substituting Bank lending since the onset of financial crisis. In 2013, the Corporate Bond Issuances by the Emerging Market comprised 30% of the Global Issuances as against 5% in 2000. In 2013, twothird of the Global issuances was processed by Non-Financial Corporate. [IOSCO Research, 2014]. Corporate Bond issue during the Q1 2016 represented 36.2% of the total Local Currency (LCY) Bond issue in the Emerging East Asia. Corporate Bond Markets registered slow growth q-o-q in Q1 2016 ranging between 0.5% (Hong Kong, China & Korea) and 3.2%(Thailand) [Asia Bond Monitor, June'2016]. Considering Non-financial Corporate only, the global concentration of the largest Corporate Bond Markets in the developed nations is reducing and some Emerging Markets in Asia are catching up. The objective of this paper is to identify the determinant factors that gave stimulus to growth of the Non-financial corporate bond segment in some of the Emerging Markets in Asia and further stimulus needed to accelerate the pace of growth. The study reveals that the interplay of 5 "I-s" i.e. Investors, Issuers, Issuances, Intermediaries and Infrastructure is what determines the Growth pace of a Corporate Bond Market. Diversity of Investors, Issuers and Issuances are the essential preconditions for attaining a Developed Bond Market. It is the market makers i.e. Dealers/Brokers and their supportive infrastructure who can bring about these diversities. This apart, in the globalised scenario, no Corporate Bond market can attain maturity without strong macro-economic fundamentals viz. low long-term Treasury interest rates, GDP growth, strong domestic currency, internationalization of domestic currency as well as existence of a vibrant International Bond Market for Foreign Bond issuers. [ABSTRACT FROM AUTHOR]

Secondary market illiquidity is an important non-default factor affecting yield spreads. Yet, a review of the literature suggests the findings are mixed, both regarding the relative size of the default versus non-default components as well as the relative importance of liquidity premium for investment-grade and high-yield bonds. While in theory country and currency risk might affect international bonds' yield spreads, empirical findings show that international corporate bonds pricing and liquidity are generally affected by the same factors as the U.S. market. We identify several other areas of disagreement and challenges in the literature that warrant further research. • Secondary market illiquidity is an important non-default factor affecting yield spreads. • Considerable debate remains on the determinants of corporate yield spreads and previous findings are mixed regarding the relative size of the default versus non-default components. • Previous findings vary regarding the relative importance of liquidity premium for investment-grade and high-yield bonds. • While there is a great deal of research on U.S. corporate bonds, research on non-US corporate bonds is scarce but growing. • We identify several areas of disagreement and challenges in the literature that warrant further research. [ABSTRACT FROM AUTHOR]

An additional instrument or established access to the capital market funding would increase business opportunities for performance, development, growth, channeling financing for sustainable and long-term economic growth and job creation. Capital market and its level of development or further development opportunities are exposed to different factors. Clear identification of them mobilizes the attention of accurate and useful decisions or actions influencing the expected results, their adoption and implementation, monitoring. With the purpose to identify a set of factors influencing the capital market deve lopment as well as to introduce a model of their short term and long term impact projections, the ARDL model for the US and Lithuanian cases is introduced. The concluding remarks state on different legal and regulatory framework, banking sector and ICT measures exposures to the different stages of the corporate bond market development.

We apply a three-tier hierarchical model of regulation, developed along the lines of Laffont and Tirole (1993), to an adverse selection problem in the corporate bond market. The bank brings the bonds to the market and informs the potential buyers about the bond risks; a unique benevolent public authority aims at maximising investors' welfare. The main goal is to investigate whether this unique authority is able to fully inform the market on a firm's true credit worthiness when banks, in order to recover doubtful credits, favour the placement of bonds issued by levered firms by concealing their true risk. By establishing the necessary conditions that allow optimal sanctions to produce the first best equilibrium, we show that the core problem of adverse selection in the corporate bond market does not lie so much in the benevolence of the delegated monitoring system, but rather in the possibility of affecting and sanctioning a firm's behavior.

In this paper, using the measures of the credit risk price spread (CRiPS) and the standardized credit risk price spread (S-CRiPS) proposed in Kariya's (A CB (corporate bond) pricing model for deriving default probabilities and recovery rates. Eaton, IMS Collection Series: Festschrift for Professor Morris L., 2013) corporate bond model, we make a comprehensive empirical credit risk analysis on individual corporate bonds (CBs) in the US energy sector, where cross-sectional CB and government bond price data is used with bond attributes. Applying the principal component analysis method to the S-CRiPSs, we also categorize individual CBs into three different groups and study on their characteristics of S-CRiPS fluctuations of each group in association with bond attributes. Secondly, using the market credit rating scheme proposed by Kariya et al. (2014), we make credit-homogeneous groups of CBs and show that our rating scheme is empirically very timely and useful. Thirdly, we derive term structures of default probabilities for each homogeneous group, which reflect the investors' views and perspectives on the future default probabilities or likelihoods implicitly implied by the CB prices for each credit-homogeneous group. Throughout this paper it is observed that our credit risk models and the associated measures for individual CBs work effectively and can timely provide the market credit information evaluated by investors. [ABSTRACT FROM AUTHOR]

Using a unique dataset of corporate bond trading information and corporate governance evaluation scores, this study examines the determinants of corporate bond market liquidity in Korea. In particular, this study explores whether corporate governance performance of a company influences liquidity of bonds issued by the company. The paper reports three important findings. First, the issue size and age of bond are important determinants of bond liquidity. Second, liquidity of corporate bonds is influenced by changes in macroeconomic conditions. Third, and most importantly, better corporate governance increases liquidity of corporate bonds. This result suggests that corporate governance is an important determinant of bond liquidity, as it lowers transaction costs by improving transparency and reducing asymmetry of information. This paper contributes to the literature by providing new evidence that corporate governance performance is an important determinant of liquidity in corporate bond markets. [ABSTRACT FROM AUTHOR]

Often taxation is considered as a restriction to any market development, lessening the willingness to effective actions or raising the opportunity costs. Therefore lots of investigations are dedicated to identification of optimal measures in order to satisfy the fiscal needs still encouraging market performance. The purpose of this paper is to identify the impact of capital income taxation on corporate bond market development by using the Laffer curve and tax burden measurements and methods. While theoretical investigations proposed an application of tax exempt to corporate bond transactions, empirical results stated no significant arguments for corporate bond market stagnation to taxation. [ABSTRACT FROM AUTHOR]

We examine price discovery in the Credit Default Swap and corporate bond market. Using a Markov switching framework enables us to analyze the dynamic behavior of the information shares during tranquil and crisis periods. The results show that price discovery takes place mostly on the CDS market. The importance of the CDS market even increases during the more volatile crisis periods. According to a cross sectional analysis liquidity is the main determinant of a market's contribution to price discovery. During the crisis period, however, we also find a positive link between leverage and CDS market information shares. Overall the results indicate that price discovery measures and their determinants change during tranquil and crisis periods, which emphasizes the importance of more flexible frameworks, such as Markov switching models. [ABSTRACT FROM AUTHOR]

This paper compares the usability of return-generating models in detecting the abnormal returns of shares during the corporate bond rating change announcements by S&P and Moody’s for 10 years. These models are the market model, the quadratic model, the downside model and the higher-order downside model. Based on daily data, there was insufficient evidence to support the private information hypothesis during upgrade announcements using all the models. Hence, no conclusion on the performance of the return-generating models could be derived in relation to rating upgrades. During the downgrade announcements, the higher-order downside model was not found to perform at the same level as the other models. This indicates that even the simplest model, like the market model, is adequate to estimate the abnormal return of share prices. [ABSTRACT FROM AUTHOR]

An additional instrument or established access to the capital market funding would increase business opportunities for performance, development, growth, channeling financing for sustainable and long-term economic growth and job creation. Capital market and its level of development or further development opportunities are exposed to different factors. Clear identification of them mobilizes the attention of accurate and useful decisions or actions influencing the expected results, their adoption and implementation, monitoring. With the purpose to identify a set of factors influencing the capital market development as well as to introduce a model of their short term and long term impact projections, the ARDL model for the US and Lithuanian cases is introduced. The concluding remarks state on different legal and regulatory framework, banking sector and ICT measures exposures to the different stages of the corporate bond market development. [ABSTRACT FROM AUTHOR]

This paper exploits the implied information of data collected from credit spreads of Chinese corporate bonds and systemic and idiosyncratic risk factors. We compute contribution of risk factors to credit spreads of Chinese corporate bonds by establishing the unbalanced panel data model, identify the key factors impacting the size of credit spreads of corporate bonds. Knowledge extracted by data mining is helpful to investors for reasonable pricing of bonds and making rational investment decisions. When selecting variables, the unbalanced panel data model is used to calculate the Zero-volatility credit spreads, which are more accurate. We use term structure adjusted return of bond index as the systemic risk factor of corporate bond market, the three Fama/French systemic factors as the systemic risk factors of stock markets and idiosyncratic stock/bond volatility and idiosyncratic bond value-at-risk as the idiosyncratic risk factors. Empirical analysis of corporate bonds sampling China's listing Corporation issued and traded on Shanghai Stock Exchange from 2008 to 2011 shows that the size of credit spreads is mainly determined by the systemic risk factors of bond market, i.e. risk factors of stock market make very little contribution to the spread; the idiosyncratic risk factors also contribute. An interesting phenomenon is that we find that the relationship between idiosyncratic stock volatility and credit spread is negative, which is contrary to extant research while the relationship is positive and mainly focuses on impact of risk factors on credit spread of corporate bond. [ABSTRACT FROM AUTHOR]

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Structural models of credit risk are known to present vanishing spreads at very short maturities. This shortcoming, which is due to the diffusive behavior assumed for asset values, can be circumvented by considering discontinuities of the jump type in their evolution over time. In this paper, we extend the pricing model for corporate bond and determine the default probability in jump-diffusion model to address this issue. To make the problem clearly, we first investigate the case that the firm value follows a geometric Brownian motion under similar assumptions to those in Black and Scholes (1973), Briys and de Varenne (1997), i.e, the default barrier is KD ( t, T) and the recovery rate is (1 − ω), where D ( t, T) is the price of zero coupon default free bond and ω is a constant (0 < ω ≤ 1). By changing the numeraire, we obtain the closed-form solution for both the price of bond and default probability. Further, we consider the case of jump-diffusion and suppose that a firm will go bankruptcy if its value V ≤ KD ( t, T) and at the same time, the bondholder will receive $(1 - \omega )\tfrac{{V_t }} {K} $. By introducing the Green function of PDE with absorbing boundary and converting the problem to an II-type Volterra integral equation, we get the closed-form expressions in series form for bond price and corresponding default probability. Numerical results are presented to show the impact of different parameters to credit spread of bond. [ABSTRACT FROM AUTHOR]

Abstract: The present paper analyzes the optimal investment strategy in a corporate (defaultable) bond, a stock and a bank account in a continuous time model. We model the corporate bond price through a reduced-form approach and solve the dynamics of its price. The optimal investment process will be worked out first with a general risk-averse utility function, and then an optimal strategy with CARA utility will be presented using martingale methods. The optimal investment strategy is analyzed numerically for the CARA utility. [Copyright &y& Elsevier]