“Factors affecting the valuation of corporate bonds”

Elton, Edwin J.; Gruber, Martin J.; Agrawal, Deepak; Mann, Christopher

doi:10.1142/9789814335409_0004

Cited by 23 publications

(22 citation statements)

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“…A sufficient return generated signals higher future earnings, which consequently reduces the default risk and the yield. Firm's rating is another measure to reflect the issuer default risk (Bhojraj and Sengupta, 2003;Mann, 2004 andJiraporn, 2010). Fama and French (1993) take a slightly different approach.…”

Section: Literature Reviewmentioning

confidence: 99%

“…All the predictors of bond yield including the issue characteristics and issuer characteristics are identified and selected as they have been normally used in the previous studies (Amihud and Mendelton, 1991;Collin-Dufresne, Goldstein and Martin, 2001, Batten et al 2014, Bhojraj & Sengupta, 2003Elton et al 2001Elton et al , 2004Tishchenko, 2004;Chen et al, 2007;Chan et al, 2007;Ahmad et al, 2009;Nakashima and Saito, 2009;Liu and Jiraporn, 2010;Tsai, 2010 andLu et al, 2010). The present study explains bond yield in terms of the issuer characteristics (representing default risk) and issue characteristics from the perspective of bond age, coupon rate and trading frequency (interest rate risk and liquidity risk).…”

Section: Measures Of Determinants Of Bond Yieldmentioning

confidence: 99%

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Determinants of Corporate Bond Yield: The Case of Malaysian Bond Market

Che-Yahya¹,

Abdul-Rahim²,

Mohd‐Rashid³

2017

IJBS

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Default risk has been recognized as one of the key determinants of bond yield. Past studies argue that default risk can be reflected by issue characteristics, issuer characteristics and interest rate behaviors on riskless security. As default risk is believed to be higher in developing markets due to the issue of illiquidity, capital inadequacy and a developing lending system, more empirical works must be focused on these markets. The present study examines the association between selected determinants and corporate bond yield in Malaysian market. Instead of focusing on the aggregate market level as has widely been carried out in previous studies, the present study concentrates on the individual issue level. The results of cross-sectional multiple regression analyses based on 61 observations in 2012 indicate that bond maturity, coupon payment, trading frequency, issuer’s rating, debt to equity ratio and return on equity ratio are the significant determinants of bond yield.Keywords: Corporate Bond Yield; Malaysian Bond Market.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Measures Of Determinants Of Bond Yieldmentioning

confidence: 99%

Determinants of Corporate Bond Yield: The Case of Malaysian Bond Market

Che-Yahya¹,

Abdul-Rahim²,

Mohd‐Rashid³

2017

IJBS

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“…This brought a number of methodological choices, which applied to the 1970's extension for the sake of comparability. Overall, the present investigation may then appear disconnected from the modern finance literature on the pricing of debt issues (see, for example , Elton et al (2001). The overall empirical approach is not fundamentally obsolete but there would be a lot to gain in importing more sophisticated credit risk pricing techniques.…”

Section: Discussionmentioning

confidence: 84%

Regulatory Versus Informational Value of Bond Ratings: Hints from History

Moreau

2009

SSRN Journal

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A multivariate analysis can be used in order to investigate the relationship between bond yields, ratings and standard control variables. Replicating such a test on a number of cross-sections may evidence a possible impact of financial regulations relying on ratings. Datasets for American corporate bond issues allow a focus on two key events of the development of rating driven regulations: the valuation of bank and life insurance portfolios introduced in the 1930's and the net capital requirements for broker dealers introduced in the 1970's. The "value" of bond ratings does show some improvement once these regulations have been passed.

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“…In the same line, [23] conclude that markets anticipate to rating changes independently that the change is within or between speculative and investment grade categories. [16] analyze the corporate bond price behaviors, taking into account that the credit rating qualifications given by Moody's and Standard & Poor's determine homogeneous groups related to the yield curve. However, they recognize the existence of other important factors that affect the price bond evolution such as the default risk, liquidity, tax liability, recovery rate and maturity.…”

Section: Credit Ratingsmentioning

confidence: 99%

Efficiency and credit ratings: a permutation-information-theory analysis

et al. 2013

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The role of credit rating agencies has been under severe scrutiny after the subprime crisis. In this paper we explore the relationship between credit ratings and informational efficiency of a sample of thirty nine corporate bonds of US oil and energy companies from April 2008 to November 2012. For this purpose we use a powerful statistical tool, relatively new in the financial literature: the complexity-entropy causality plane. This representation space allows us to graphically classify the different bonds according to their degree of informational efficiency. We find that this classification agrees with the credit ratings assigned by Moody's. In particular, we detect the formation of two clusters, which correspond to the global categories of investment and speculative grades. Regarding the latter cluster, two subgroups reflect distinct levels of efficiency. Additionally, we also find an intriguing absence of correlation between informational efficiency and firm characteristics. This allows us to conclude that the proposed permutation-information-theory approach provides an alternative practical way to justify bond classification.

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“Factors affecting the valuation of corporate bonds”

Cited by 23 publications

References 0 publications

Determinants of Corporate Bond Yield: The Case of Malaysian Bond Market

Determinants of Corporate Bond Yield: The Case of Malaysian Bond Market

Regulatory Versus Informational Value of Bond Ratings: Hints from History

Efficiency and credit ratings: a permutation-information-theory analysis

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