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A eurozone exit or breakup exposes bondholders to currency redenomination risk. I quantify redenomination risk since the sovereign debt crisis: It contributes substantially to credit spreads around changes in government in France and Italy. Bond prices suggest that markets have priced a potential Italian exit as isolated, and a French one as a breakup. Unlike conventional default risk, redenomination risk can be negative depending on the strength of the national "shadow" currency. Countries with strong shadow currencies earn breakup-insurance premia from the eurozone analog of "exorbitant privilege." Yield effects are quantitatively large for implied exit probabilities as low as 1%. [ABSTRACT FROM AUTHOR]

This paper explores how selective default expectations affect the pricing of sovereign bonds in a historical laboratory: the German default of the 1930s. We analyze yield differentials between identical government bonds traded across various creditor countries before and after bond market segmentation. We show that, when secondary debt markets are segmented, a large selective default probability can be priced in bond yield spreads. Selective default risk accounted for one-third of the yield spread of German external bonds over the risk-free rate during the 1930s. Selective default expectations arose from differences in the creditor countries' economic power over the debtor. [ABSTRACT FROM AUTHOR]

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In this paper, we adopt an ensemble machine learning framework—a Light Gradient Boosting Machine (LightGBM) and develop an algorithmic credit rating prediction model by innovatively incorporating firms' extra supply chain information both from suppliers and customers. By utilizing data from listed firms in North America from 2006 to 2020, our results find that the accuracy of the prediction improves by incorporating supply chain information in the previous year, compared to the inclusion of supply chain information in the current year. Besides, we identify the most important factors the stakeholders should pay attention to. Interestingly, we show that the models utilizing the current year's information perform better after the strike of the COVID-19, indicating that the epidemics may have accelerated the spread of credit risk along the supply chain. Furthermore, supplier information is found to be more valuable than customer information in predicting the focal firm's credit rating. A comparison of our framework with the existing methods vindicates the robustness of our main results. [ABSTRACT FROM AUTHOR]

Western grape leaf skeletonizer was first reported in southern California in 1941 and soon became a serious pest of commercially produced grapes in that region. Their gregarious larvae can easily defoliate vineyards and they remained a major problem for production of grapes until this pest was reunited with its host-specific natural enemies. Efforts to import into southern California effective natural enemies during the 1950s from southern Arizona succeeded in reducing populations of this moth to economically tolerable levels. We report for the first time on releases of natural enemies into central and northern California for control of western grape leaf skeletonizer. Over 600,000 parasitoids new to this region were released during late 1970s–1980s by the state's Biological Control Program. Foreign exploration by the California Department of Food and Agriculture (CDFA) into Mexico in 1978 resulted in additional parasitoids new to California: a new biotype of Ametadoria harrisinae and a new species of Chetogena sp. (Tachinidae). The high numbers of tachinids released throughout California is credited with aiding in the spread of a highly virulent strain of granulosis virus which in turn caused high levels of mortality to western grape leaf skeletonizer larvae. Reports of WGLS outbreaks in vineyards over the last 15 years are rare, in contrast to previous years. [ABSTRACT FROM AUTHOR]

This article is an examination of how investors in the corporate bond market in emerging economies react to patents. To empirically explore this question, we constructed a sample of 1862 Chinese corporate bonds issued between 2004 and 2020 and gathered data on Chinese domestic patents, reverse innovation patents, and the validity of patents. The empirical results suggest that domestic patents are the primary source of information for bond investors in China when evaluating corporate innovation and that investors can successfully discern between patents that are valid and those that are not. At the same time, the positive relationship between corporate innovation and bond prices is found to be negatively moderated by credit ratings and state ownership. [ABSTRACT FROM AUTHOR]

The Middle Allochthon of the Galicia-Trás-os-Montes Zone (GTMZ) in NW Iberia is an assemblage of oceanic units representing the Variscan suture of one or more peri-Gondwanan oceans. This contribution brings new geochronological and geochemical data from the Middle Allochthon of the Morais Complex, in northern Portugal. There, the oceanic ensemble consists of a stack of five tectonic units which from bottom to top are the Junqueira, Pombais and Izeda oceanic supracrustals and the Remondes and Morais-Talhinhas ophiolitic units. The Junqueira and Pombais units consist of greenschists and metapelites. No age data are available for these two units, but a correlation is established with a Cambro-Ordovician unit in the Órdenes Complex of Galicia (NW Spain) dated at 500 Ma. The Izeda Unit consists of fine-grained, low-grade amphibolites transitional to epidote-amphibolites and greenschists, for which an age of 484 ± 3 Ma has been obtained for a metabasic tuff. In the ophiolitic ensemble, the Remondes and Morais-Talhinhas units consist of fine-grained amphibolites associated with deformed metagabbros, mafic cumulates and serpentinized ultramafics. In this study, two plagiogranite samples from the Remondes Unit yielded a complex spread of age data with Silurian ages representing the dominant population. This suggests that the newly defined Remondes Unit is younger than the Izeda Unit but older than the previously published age for these rocks, which are considered part of the overlying Morais-Talhinhas Unit, dated as Devonian (406–395 Ma) in a previous study. The geochemistry of the basic rocks in the five units is that of NMORB with a subduction-derived component that varies from weak to null. The ages, together with new and previously published whole rock geochemical data obtained from basic igneous samples, are interpreted to date and reflect the formation of igneous protoliths in oceanic ridge settings associated with the Mid-Variscan Ocean, a part of the Rheic oceanic realm that registered magmatic activity between the late Cambrian and the Lower Devonian. [ABSTRACT FROM AUTHOR]

The distribution of farm locations and sizes is paramount to characterize patterns of disease spread. With some regions undergoing rapid intensification of livestock production, resulting in increased clustering of farms in peri-urban areas, measuring changes in the spatial distribution of farms is crucial to design effective interventions. However, those data are not available in many countries, their generation being resource-intensive. Here, we develop a farm distribution model (FDM), which allows the prediction of locations and sizes of poultry farms in countries with scarce data. The model combines (i) a Log-Gaussian Cox process model to simulate the farm distribution as a spatial Poisson point process, and (ii) a random forest model to simulate farm sizes (i.e. the number of animals per farm). Spatial predictors were used to calibrate the FDM on intensive broiler and layer farm distributions in Bangladesh, Gujarat (Indian state) and Thailand. The FDM yielded realistic farm distributions in terms of spatial clustering, farm locations and sizes, while providing insights on the factors influencing these distributions. Finally, we illustrate the relevance of modelling realistic farm distributions in the context of epidemic spread by simulating pathogen transmission on an array of spatial distributions of farms. We found that farm distributions generated from the FDM yielded spreading patterns consistent with simulations using observed data, while random point patterns underestimated the probability of large outbreaks. Indeed, spatial clustering increases vulnerability to epidemics, highlighting the need to account for it in epidemiological modelling studies. As the FDM maintains a realistic distribution of farm location and sizes, its use to inform mathematical models of disease transmission is particularly relevant for regions where these data are not available. Author summary: We have developed a model to predict the location and size of poultry farms in countries or regions with limited data. This is important because knowing the distribution of farms helps in understanding how diseases spread, especially in areas with rapidly growing farm populations. Our model uses advanced statistical methods and is calibrated with environmental and human activity data to simulate farm locations and sizes, which we tested on farms in Bangladesh, Gujarat (India), and Thailand. We found that our model creates realistic patterns of farm locations and sizes, which are crucial for predicting disease outbreaks. When we simulated disease spread, our model showed that farms clustered together are more vulnerable to large outbreaks. This highlights the need for realistic farm data in disease prevention efforts. Our model can help public health officials in regions without detailed farm information to better plan and respond to potential disease threats. This work is a step towards better protecting both animal and human health from the spread of diseases. [ABSTRACT FROM AUTHOR]

This article presents and interprets long-run evidence on corporate bonds since the 1860s for both the United States and United Kingdom. Even very high-quality corporate bonds have provided a significant credit risk premium, and the reward from buying high-yield (or junk) bonds is appreciably higher. Yield spreads of corporates over government bonds incorporate this premium but are not a measure of the expected premium because they also encapsulate expected default losses. This study reports on default and recovery rates over the long haul and reviews the determinants of yield spreads and default rates. The authors present evidence showing that corporate bonds are a distinct asset class. Finally, it examines whether factors and other return regularities can help boost corporate bond returns and provide positive premia. [ABSTRACT FROM AUTHOR]

Purpose: The study investigates the impact of the interaction effect of product market competition and rollover risk on the default risk of the firms. Design/methodology/approach: The study used the sample of unbalanced panel data from Indian corporates without any survivability bias over the period from 2009 to 2020 consisting of 30,396 firm-year observations of 6,718 firms spread across 143 industry groups. The panel data regression tests the interaction effect in the context of the asset substitution problem, predation threat theory, competitive shock, and competitive risk. Findings: The empirical results highlighted the dominance of the predatory effect of competition over the disciplinary advantage of short-term debts. The competitive shock to the industry results in a higher credit spread for refinancing short-term debt and significantly increases rollover risk for firms. Smaller firms have higher default risk from rollover losses than larger firms in the face of competition due to asset-substitution problems and strong rivalry. For firms with weaker fundamentals, the interaction effect of rollover risk and competition exacerbates the flight-to-quality problem, resulting in a systemic event. Practical implications: The investors can benefit by factoring ex-ante the interdependence of competition, debt market illiquidity, and default premia while calculating the credit risk. The shareholders of competitive firms can reduce the moral hazard of refinancing the rollover losses and defaulting at a higher fundamental default threshold, by reducing sub-optimal utilization of funds by managers and agency costs. Originality/value: As per the best of author knowledge, the present study is the first to study the moderating effect of product market competition in exacerbating default risk through the rollover channel. [ABSTRACT FROM AUTHOR]

We implement a two‐stage methodology based on the structural vector autoregressive and time‐varying parameter vector autoregressive models to examine the time‐varying effect of distinct types of oil‐price shocks on sovereign credit risks measured by credit default swap (CDS) spreads in Gulf Cooperation Council countries. Using monthly data for the period from May 2011 to February 2022, our results show time‐varying responses to structural oil shocks in the short‐ and medium‐run periods, with more fluctuations in responses detected over the full sample period in the former. Overall, we detect a break in the contagious impacts of oil shocks during and in the aftermath of, the 2014–2015 oil crisis and COVID‐19 crisis. Specifically, the Bahraini market is found to exhibit a positive (negative) reaction to the oil supply shocks (OS) and oil market‐specific demand shocks (OSD) throughout the pandemic period. Furthermore, we uncover a transient response from the Saudi and Qatari CDS spreads to the aggregate demand shocks (ADS) and the OSD over the full sample period, indicating the need for portfolio rebalancing. In the UAE, we detect a positive impact over the three sampled years of OSD since 2011. Moreover, a notable decoupling pattern continues to appear between short‐ and medium‐term innovations in the ADS. Our results suggest adopting more conservative trading in the CDS markets while understanding the oil price and the economic state. The complexity of the trading strategy should also depend on the target Gulf market itself and that seems essential when it comes to investing in Qatar and Saudi Arabia. [ABSTRACT FROM AUTHOR]

We develop a theory of endogenous uncertainty in which the ability of investors to learn about firm-level fundamentals is impaired during financial crises. At the same time, higher uncertainty reinforces financial distress. Through this two-way feedback loop, a temporary financial shock can cause a persistent reduction in risky lending, output, and employment that coincides with increased uncertainty, default rates, credit spreads, and disagreement among forecasters. We embed our mechanism into standard real business cycle and New-Keynesian models and show how it generates endogenous and internally persistent processes for the efficiency and labour wedges. [ABSTRACT FROM AUTHOR]

We propose a pricing formula for a defaultable zero-coupon bond with imperfect information under a regime switching model using a structural form of credit risk modelling. This paper provides explicit representations of risky debt under regime switching with a constant interest rate and risky debt under regime switching with a regime switching interest rate. While the value of the firm's equity is observed continuously, we assume that the total value of the firm is only observed at discrete times, such as the dates of the release of the firm's annual reports, or quarterly reports. This uncertainty about the true value of the firm results in credit spreads that do not approach zero as the debt approaches maturity, which is a problem with many structural models. The firm's value is typically decomposed into its equity and debt; however, we consider the asset–to–equity ratio, an accounting ratio used to examine a firm's financial well-being. The parameters in our model are regime switching, where the regime can be thought of as the state of the economy. A Markov chain with a constant transition rate matrix produces the regime switching. [ABSTRACT FROM AUTHOR]

Related party transactions (RPTs) can serve as channels for the spread of credit risk events among blockchain firms. However, current credit risk-assessment models typically only consider a firm's individual characteristics, overlooking the impact of related parties in the blockchain. We suggest incorporating RPT network analysis to improve credit risk evaluation. Our approach begins by representing an RPT network using a weighted adjacency matrix. We then apply DANE, a deep network embedding algorithm, to generate condensed vector representations of the firms within the network. These representations are subsequently used as inputs for credit risk-evaluation models to predict the default distance. Following this, we employ SHAP (Shapley Additive Explanations) to analyze how the network information contributes to the prediction. Lastly, this study demonstrates the enhancing effect of using DANE-based integrated features in credit risk assessment. [ABSTRACT FROM AUTHOR]

While the production of credit ratings has long been limited mainly to rating agencies (CRAs), recent years have seen the growing popularity of consensus credit ratings crowdsourced from banks (i.e., bank ratings). We provide the first comprehensive examination of the properties and informativeness of bank ratings relative to CRA ratings. We find that bank ratings often deviate from CRA ratings, with over 60% of firm-months having different bank and CRA ratings. These deviations contain useful information. Bank ratings improve out-of-sample prediction of defaults and CRA rating revisions and explain the cross-section of credit spreads. However, bank ratings do not improve out-of-sample prediction of credit excess returns, indicating that current prices incorporate bank rating information. Overall our findings suggest that bank ratings are a useful supplement to traditional credit ratings. [ABSTRACT FROM AUTHOR]

We investigate the trading and yield effects of covenant-lite (cov-lite) high-yield bond contracts, which have a restricted (lite) set of covenants. The excluded covenants often are those that use accounting performance measures. Although much research has focused on the potential benefits of accounting as a basis for debt contracting, little is known about settings where it may be optimal to exclude accounting performance statistics from public debt contracts. We find that cov-lite high-yield bonds have a higher trading turnover and lower yield spreads. Our findings provide empirical support for theory, which predicts, for optimal bond covenant design, that a trade-off between improving trading ease versus enhanced investor protection needs to be managed. These results enhance our understanding of the limits of accounting's role in (bond) contracting design. [ABSTRACT FROM AUTHOR]

During our 2007 to 2015 sample period, firms recorded unrealized gains and losses on fair-valued liabilities attributable to changes in the firms' own credit risk, referred to as the debt valuation adjustment (DVA), in earnings. Various parties criticized the inclusion of DVA in earnings as counterintuitive and manipulable. Using a small but comprehensive sample of European banks reporting nonzero DVA during this period, we decompose banks' DVA into a normal portion explained by economic factors (e.g., changes in bond yield spreads) and an abnormal portion (the residual). Controlling for abnormal loan loss provisions (LLP) and realized securities gains and losses (RGL), we find that banks' abnormal DVA is negatively associated with their premanaged earnings, consistent with banks exercising discretion over DVA to smooth earnings. We further find that banks that record larger LLP or RGL or that have histories of using LLP or RGL to smooth earnings are less likely to exercise discretion over DVA. These findings obtain in the financial crisis but not afterward. Collectively, our findings suggest that banks exercised discretion over DVA substitutably with discretion over LLP and RGL during the crisis. With the caveat that our analysis is limited by a small sample and the inherent difficulties of DVA decomposition, our findings have implications for how bank regulators and investors should interpret banks' reported DVA, particularly in stress periods such as the crisis, and they provide support for the International Accounting Standards Board and Financial Accounting Standards Board's (FASB) decisions to require firms to record DVA in other comprehensive income starting in 2018. [ABSTRACT FROM AUTHOR]

We develop an asset pricing model with endogenous corporate policies that explains how inflation jointly affects real asset prices and corporate default risk. Our model includes two empirically founded nominal rigidities: fixed nominal debt coupons (sticky leverage) and sticky cash flows. These two frictions result in lower real equity prices and credit spreads when expected inflation rises. A decrease in expected inflation has opposite effects, with even larger magnitudes. In the cross-section, the model predicts that the negative impact of higher expected inflation on real equity values is stronger for low leverage firms. We find empirical support for the model's predictions. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

This study estimates the monetary policy reaction function (MPRF) in a Dynamic Stochastic General Equilibrium (DSGE) framework using Bayesian analysis for the emerging economies. DSGE models are suitable for the policy analysis because of their simplicity and prominent role of forward-looking variables. This is a pioneer study investigating the combined effects of credit spreads, fiscal imbalances, and monetary autonomy on interest rates for BRICS member countries. Using real data for the period 1970–2021, the posterior estimates confirm that both credit spread and fiscal imbalance significantly contribute to fluctuations in output, inflation, and interest rates in all the sample economies. The estimates show that fluctuations in the inflation rate are due to supply shocks. The empirical estimates also reveal that fiscal imbalances shock significantly affect output in Brazil, India, and South Africa, whereas, based on real data inflation and interest rate are significantly affected by fiscal imbalance shocks in China and South Africa. Yet, the findings suggest that the effects of various shocks on output and interest rates vary across countries. [ABSTRACT FROM AUTHOR]

Background: Grapevine Pinot gris virus (GPGV) infects grapevines worldwide and causes symptoms such as chlorotic mottling and deformations on leaves, stunted shoots and short panicles, or none of these symptoms if it appears as latent infection. So far, the consequences of GPGV infections for winegrowers are difficult to assess since important information such as plant performance at different GPGV infection levels and symptom expression are not fully clarified. Methods: In order to investigate the course of GPGV spread, annual visual evaluations and ELISA tests were conducted over 3–4 consecutive years in four GPGV-infected vineyards in southern Germany: GEM, HEC, NIM, and REI. The program PATCHY was used to analyze spatial disease patterns. Sanger sequencing was used to determine virus isolates in vines at different GPGV infection levels, to test their respective influence on symptom expression. Yield and GrapeScan (FTIR) analyses were conducted to test the impact of different GPGV infection levels and isolates on fruit quantity and quality. Results: GPGV infections significantly increased in all four vineyards (GEM 22–32%, HEC 50–99%, NIM 83–90%, REI 56–76%) with significant spreading patterns across and along rows. Specific symptom progression patterns were not observed. According to our results, the virus isolate has an influence on whether symptoms develop during a GPGV infection. While yield analyses revealed that yield losses only occur in symptomatic vines and range from 13 to 96% depending on the severity of symptoms, latent infections have no impact on grape production. No relevant effects of GPGV infections on must quality were observed. Conclusions: Secondary spread of GPGV was observed in all vineyards monitored, indicating vector-borne transmission that is likely to be accelerated by human viticultural management. GPGV should be further monitored to prevent the accumulation of detrimental symptomatic isolates. The results of this study can be used to assess the risk of GPGV to viticulture and should be considered when developing management strategies against the virus. [ABSTRACT FROM AUTHOR]

Potato is a vital crop worldwide and its production is threatened by diseases caused by viruses, bacteria, fungi and other forms of microorganisms. Early detection and identification of these pathogens are essential to control their spread and minimize yield losses. Improvements in detection and identification have come as molecular detection techniques have been developed, such as Enzyme-Linked Immunosorbent Assay (ELISA), Polymerase Chain Reaction (PCR), Quantitative real-time PCR (qPCR), RNase H-dependent PCR (rhPCR) and Loop-Mediated Isothermal Amplification (LAMP). In this review, the mechanisms of these molecular techniques are discussed. These techniques have revolutionized the diagnosis and management of potato diseases. They offer high sensitivity, specificity and rapid detection, making them invaluable tools for disease surveillance and diagnosis. However, further development and optimization of these techniques, and novel techniques such as artificial intelligence, will undoubtedly contribute to more effective disease diagnosis, management and the protection of potato crops. [ABSTRACT FROM AUTHOR]

Purpose: The authors construct an index of economic policy uncertainty (EPU) for Greece using textual analysis and analyze its role in the 10-year Greek economic crisis. Design/methodology/approach: To identify the causal relationship between various measures of economic activity and EPU in Greece, the authors use a sophisticated "shock-based" structural vector autoregressive identification scheme. Additionally, the authors use two additional models to ensure the robustness of the results. Findings: EPU is negatively associated with domestic economic activity and economic sentiment, and positively with bond credit spreads. EPU is also estimated to have prolonged the crisis even in periods when macroeconomic imbalances were cured. The results are robust across various model specifications and different proxies of economic activity. Originality/value: Brunnermeier (2017) observed that uncertainty may be central to understanding the evolution of the Greek crisis. Yet little attention has been paid to policy uncertainty in the existing long and growing literature on the Greek crisis. The authors attempt to fill this gap. [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]

This paper analyses the effects of the extraordinary measures implemented by the Central Bank of Mexico during the COVID-19 pandemic on financial conditions. For this purpose, we estimate a factor-augmented vector autoregressive model for the period 2001–2021. Based on this model, we construct a Financial Conditions Index, estimate the response of this indicator and its components from a shock to the outstanding amount of these measures, and conduct a counterfactual exercise to further analyse the effect of the aforementioned measures. The main results indicate that these extraordinary measures seem to have contributed to improve financial conditions. In particular, we find that if these measures had not been implemented, the sovereign risk premium, the 10-year government bond yield, the slope of the yield curve, and the long- and short-term yield spreads between Mexico and the US would have been higher by around 56, 31, 27, 37, and 49 basis points in December 2020, respectively. At the same time, the Mexican peso/US dollar exchange rate and its volatility would have been higher by 5 and 2 percentage points, respectively. In turn, the Mexican stock market index would have been lower by 10 percentage points. [ABSTRACT FROM AUTHOR]

The Merton (On the pricing of corporate debt: The risk structure of interest rates. J. Finance, 1974, 29, 449–470) model is often considered the simplest structural model of default. Its famous modification developed by KMV is also widely used and well understood by both practitioners and academics. However, as the underlying asset process is driven by a diffusion process, the Merton model suffers from the well-known issue of the vanishing of credit spreads for progressively shorter maturities. To overcome such shortfall, several modifications have been proposed in the literature; however, none of these, despite succeeding at better pricing spreads and explaining default dynamics, are able to retain the simplicity of the Merton model. In this paper, we propose a new structural model of default driven by an additive process whose pricing formulas are as simple as – if not even simpler than – those of the Merton model. We named such model the Carr model of default after Peter Carr, given his recent passing and the fact that the underlying asset distribution is the one introduced in Carr and Torricelli (Additive logistic processes in option pricing. Finance Stoch., 2021, 25, 689–724) and Carr and Maglione (Compound option pricing and the Roll-Geske-Whaley formula under the conjugate-power Dagum distribution. J. Deriv., 2022, 31, 1–32). We first provide pricing formulas for the firm's claims and credit spreads, and then discuss a general theory of change of measure for such processes in order to introduce a distance-to-default version of this newly-introduced model. Finally, we empirically test the Carr versus the Merton model and document the far better ability of the Carr model to reproduce CDS spreads as well as explain their cross-sectional and time-series variation. [ABSTRACT FROM AUTHOR]

We formulate a trade-off model that integrates mean reversion in earnings, encompassing dynamic financing decisions that entail both the initial leverage selection and the subsequent decision related to the financing of a growth option. We identify that higher earnings mean reversion speed increases both initial and subsequent leverage ratios for growth option financing and accelerates investment, revealing the volatility-mitigating role of mean reversion speed. Furthermore, our analysis reveals a U-shaped relation between profitability and leverage, influenced by the presence of growth options. In contrast, higher long-term profitability has a positive relationship with leverage, highlighting the differential impact of long-term versus contemporaneous profitability on leverage. The model also yields further implications for corporate policies regarding debt priority structure, investment timing, default thresholds, and credit spreads, contingent on earnings mean reversion dynamics. Our empirical analysis reveals the prevalence of mean reversion in earnings among US firms and provides a comparison of capital structure decisions of firms with mean reverting earnings against firms having non-stationary earnings dynamics. [ABSTRACT FROM AUTHOR]

For a sample of public bond issues by U.S. firms between 2000 and 2019, sourced from the Securities Data Corporation (SDC) New Issues database, we examine the relationship between CEO-friendly boards and the cost of debt. To explore this relationship, we construct proxies for board friendliness based on social connections sourced from the BoardEx database, classifying a board as friendly if it includes at least one outside director who has a social connection with the CEO. Our regression analysis reveals a negative association between CEO-friendly boards and yield spreads and a positive association between CEO-friendly boards and credit ratings. These effects exist after controlling for firm and bond characteristics based on prior literature. The results are robust to an alternative measure of board friendliness and potential endogeneity. These findings imply that firms with a CEO-friendly board experience a lower cost of bond financing. This supports the argument that effective communication between CEOs and directors contributes to the enhancement of creditor interests. Our results carry a practical implication that firms heavily reliant on debt should actively employ CEO-friendly boards. Despite the burgeoning literature on CEO-friendly boards, there is a lack of research on the relationship between CEO-friendly boards and the cost of debt. Our results fill this gap in the extant literature on CEO-friendly boards. [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]

This article studies high-frequency econometric methods to test for a jump in the spread of bond yields. We propose a coherent inference procedure that detects a jump in the yield spread only if at least one of the two underlying bonds displays a jump. Ignoring this inherent connection by basing inference only on a univariate jump test applied to the spread tends to overestimate the number of jumps in yield spreads and puts the coherence of test results at risk. We formalize the statistical approach in the context of an intersection union test in multiple testing. We document the relevance of coherent tests and their practicability via simulations and real data examples. [ABSTRACT FROM AUTHOR]

We assess the quantitative relevance of expectations-driven sovereign debt crises, focusing on the southern European crisis of the early 2010s and the Argentine default of 2001. The source of multiplicity is the one in Calvo (1988). Crucial for multiplicity is an output process characterized by long periods of either high growth or stagnation, which we estimate using data for these countries. We find that expectations-driven debt crises are quantitatively relevant but state dependent, as they occur only during periods of stagnation. Expectations, and how they respond to policy, are the major factors explaining default rates and credit spread differences between Spain and Argentina. [ABSTRACT FROM AUTHOR]

The minimum (worst case) value of a long-only portfolio of bonds, over a convex set of yield curves and spreads, can be estimated by its sensitivities to the points on the yield curve. We show that sensitivity based estimates are conservative, i.e., underestimate the worst case value, and that the exact worst case value can be found by solving a tractable convex optimization problem. We then show how to construct a long-only bond portfolio that includes the worst case value in its objective or as a constraint, using convex–concave saddle point optimization. [ABSTRACT FROM AUTHOR]

This study aims to jointly predict conditional quantiles and tail expectations for the returns of the most popular cryptocurrencies (Bitcoin, Ethereum, Ripple, Dogecoin and Litecoin) using financial and macroeconomic indicators as explanatory variables. We adopt a Monotone Composite Quantile Regression Neural Network (MCQRNN) model to make one- and five-steps-ahead predictions of Value-at-Risk (VaR) and Expected Shortfall (ES) based on a rolling window and compare the performance of our model against the Historical simulation and the standard ARMA(1,1)-GARCH(1,1) model used as benchmarks. The superior set of models is then chosen by backtesting VaR and ES using a Model Confidence Set procedure. Our results show that the MCQRNN performs better than both benchmark models for jointly predicting VaR and ES when considering daily data. Models with the implied volatility index, treasury yield spread and inflation expectations sharpen the extreme return predictions. The results are consistent for the two risk measures at the 1% and 5% level both, in the case of a long and short position and for all cryptocurrencies. [ABSTRACT FROM AUTHOR]

Copyright of Canadian Journal of Administrative Sciences (John Wiley & Sons, Inc.) is the property of Wiley-Blackwell 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.)

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]

A correction is presented to the article "A Dynamic Theory of Lending Standards," which appeared in the March 5, 2024 online issue.

The article discusses Japan's economic outlook, forecasting a 0.2% GDP growth for 2024 and a 1.1% growth for 2025. Real income gains are expected to drive consumption-led recovery, while exports may remain stagnant due to weak demand from the EU. The Bank of Japan is anticipated to deliver an additional rate hike in December, influenced by political and currency factors. Former defense minister Shigeru Ishiba's election as the Liberal Democratic Party leader is expected to focus on economic growth in the near term, with plans for a national election in late October. [Extracted from the article]

Two intermediary-based factors—a corporate bond dealer inventory measure and a broad intermediary distress measure—explain more than 40 |$\%$| of the puzzling common variation in credit spread changes beyond canonical structural factors. A simple intermediary-based model with partial market segmentation accounts for intermediary factors' explanatory power and delivers three further implications with empirical support. First, whereas bond sorts on risk-related variables produce monotonic loading patterns on intermediary factors, non-risk-related sorts produce no pattern. Second, dealer inventory comoves with corporate-credit assets only, whereas intermediary distress comoves with both corporate-credit and non-corporate-credit assets. Third, dealers' inventory responds to (instrumented) bond sales by institutional investors. [ABSTRACT FROM AUTHOR]

Increases in government debt are associated with a reduction in the yield spread between high-grade corporate bonds and long-term Treasuries and an increase in fiscal uncertainty. Consequently, increases in government debt significantly reduce the firm's likelihood of acquisition. The effect is stronger among firms whose debt is a closer substitute for Treasuries and firms with greater exposure to fiscal uncertainty. A positive change in government debt motivates acquirers to avoid cash financing or more irreversible deals. The average deal quality is lower during periods of rising public debt, consistent with heightened fiscal uncertainty impeding monitoring and fostering "bad" deals. (JEL D80, E22, E62, G18, G34, G38). [ABSTRACT FROM AUTHOR]

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We investigate the effectiveness of the Bank Recovery and Resolution Directive (BRRD) in mitigating the transmission of credit risk from banks to their sovereign, using CDS spreads to capture bank and sovereign credit risk for a sample of 43 banks in 8 Euro Area countries over the period 2009–2020. If the BRRD bail-in framework is credible, changes in bank default risk should not be transmitted to sovereign risk. In a novel approach we use banks earnings announcements to identify exogenous shocks to bank credit risk and investigate to what extent bank risk is transmitted to sovereign risk before and during the BRRD era. We find that bank-to-sovereign risk transmission has diminished after the introduction of the BRRD, suggesting that financial markets judge the BRRD framework as credible. The decline in bank-sovereign risk transmission is particularly significant in the periphery Euro Area countries, especially Italy and Spain, where the bank-sovereign nexus was most pronounced during the sovereign debt crisis. We report that the lower bank-to-sovereign credit risk transmission is associated with the parliamentary approval of the BRRD and not with the OMT program launched by the ECB to affect sovereign yield spreads, nor with specific bail-in or bailout cases which occurred during the BRRD era. Finally, we document that the reduction in risk transmission is most pronounced for banks classified as a Global Systemically Important Bank (G-SIB), stressing the importance of additional capital buffers imposed by Basel III. [ABSTRACT FROM AUTHOR]

In China, porcine reproductive and respiratory syndrome virus (PRRSV) vaccines are widely used. These vaccines, which contain inactivated and live attenuated vaccines (LAVs), are produced by MARC-145 cells derived from the monkey kidney cell line. However, some PRRSV strains in MARC-145 cells have a low yield. Here, we used two type 2 PRRSV strains (CH-1R and HuN4) to identify the genes responsible for virus yield in MARC-145 cells. Our findings indicate that the two viruses have different spread patterns, which ultimately determine their yield. By replacing the viral envelope genes with a reverse genetics system, we discovered that the minor envelope proteins, from GP2a to GP4, play a crucial role in determining the spread pattern and yield of type 2 PRRSV in MARC-145 cells. The cell-free transmission pattern of type 2 PRRSV appears to be more efficient than the cell-to-cell transmission pattern. Overall, these findings suggest that GP2a to GP4 contributes to the spread pattern and yield of type 2 PRRSV. [ABSTRACT FROM AUTHOR]

With all the green bond data issued in China from 2016 to 2022, the authors match the green bonds that disclose the environmental information of the duration with the green bonds that do not disclose the environmental information of the duration, so as to verify whether the green disclosure premium exists, and whether the quality of environmental information disclosure and the third party disclosure certification are the main influencing factors. The results show that the credit spread of green bonds that disclose the environmental information of the duration is 13.7 percentage points lower than that of the control group, indicating that there is a green disclosure premium in China's green bond market; the quality of environmental information disclosure and third party disclosure certification are the main influencing factors of green disclosure premium, and state owned enterprises, non-polluting industries and the central and western regions have an inhibitory effect on green disclosure premium. [ABSTRACT FROM AUTHOR]

This study investigates the way in which corporate social responsibility (CSR) practices are perceived by the U.K. bond market. In this respect, we distinguish between the two ambiguous subdimensions – that is, CSR disclosure and CSR performance. We analysed the association between CSR disclosure and the cost of corporate bonds by means of a multi‐theoretical framework combining economics with social theories. We also examine the moderating effect of the CSR performance on this relationship. We estimate a random‐effects GLS regression and random‐effects ordered probit regression using a sample of companies belonging to the FTSE 100 index during the 2013–2017 period. We find that bondholders and credit rating agencies incorporate CSR disclosure into their assessment and evaluation of the firms' creditworthiness. Mainly, our results show that bondholders encourage and value CSR reporting primarily for companies with weak CSR performance, but stop doing so once the company reach a certain level of CSR performance. We further examined each CSR disclosure subdimension and aspects of corporate creditworthiness through a disaggregated analysis. Both environmental and community relations disclosures are significant in corporate creditworthiness, whereas only responsibility disclosure is related to credit ratings. Finally, results highlight that disclosure of CSR information is especially relevant to financially healthy firms. Our findings have several implications for academics, practitioners, and policymakers in understanding the consequences of CSR disclosure and CSR performance on bond markets and credit rating. [ABSTRACT FROM AUTHOR]

At the micro and nanoscales, thermo-elastic damping is regarded as one of the most crucial factors for promoting energy dissipation in vibrating structures. The thermo-elastic damping of a thin rotational ring resonator is explored in this paper based on three phase lag heat conduction model for thermal relaxations and nonclassical elasticity for small scale effects. Solving the heat conduction equation for radial direction heat flow and zero heat flux boundary conditions yields the temperature spread across ring cross-section. The equation takes into account only the rotating narrow ring's in-plane vibrations. For the frequency dependent thermo-elastic damping, the combined nonlocal thermo-elasto-dynamic equations are solved. The present model is validated with the experimental and finite element data. The thermo-elastic damping of rotating rings has been found to be over predicted by classical elasticity. For a particular small scale factor, as rotational speed rises by 80%, the equivalent thermo-elastic damping of the ring resonator reduces by 43%. In addition, the effects of cross-sectional shape, nonlocal scale factor, rotating speed, modenumber, ambient temperature, and substance on thermo-elastic damping are thoroughly explored in this work. The results presented here are useful to build and construct future nanoscale resonant sensors and radio-frequency devices. [ABSTRACT FROM AUTHOR]

This study aims to predict financial distress in an emerging country using data on ST listed companies in China from 2001 to 2021. A new Aalen hazard model with mixed data sampling (MIDAS) is adopted to investigate the impact of monthly macroeconomic variables and quarterly financial variables on financial distress. The empirical results show that the current ratio, operating profit ratio, current capital ratio, retention ratio, profit ratio and income ratio of listed companies have a significant impact on the time-varying intensity of financial distress. The consumer price index has a negative relation with the intensity of financial distress, while the production price index and credit spreads have a positive influence. Finally, the results of the robustness tests are consistent with those with different lag orders. [ABSTRACT FROM AUTHOR]

This paper empirically evaluates the impact of ownership structure on the cost of credit in US banks. It does so by comparing their grouped option-adjusted credit spreads on the outstanding debt issues. As the overall risk of the creditors is reflected in the yield spread of the firms' outstanding bonds, separately classifying bank-holding companies and stand-alone banks and controlling risk ratings, maturities, and issue sizes enables us to compare the yield spreads tied to ownership structure. After computing the option-adjusted yield spreads of outstanding operating and holding company bonds, we used these values in a master regression equation to test the statistical and economic significance of the binary variable separating the option-adjusted spreads of the two sets. Our work finds that when the S&P ranks and maturities are controlled, US bank-holding companies finances with higher cost of credit compared with stand-alone banks, although holding companies add a layer of liability protection due to the legal separation between the assets and the owners. This suggests that certain characteristics of US bank-holding companies, such as higher leverage and higher systematic risk levels, make them riskier compared with traditional stand-alone banks, offsetting the benefits of forming a holding company. [ABSTRACT FROM AUTHOR]