Corporate Yields: Effect of Credit Ratings and Sovereign Yields
AEA Papers and Proceedings
vol. 110,
May 2020
(pp. 499-503)
Abstract
We empirically evaluate the importance of two sources of public information affecting pricing of global corporate bonds: bond ratings provided by rating agencies and sovereign yields of the issuer's country. We find that both in the cross section of firms and over time more variation in corporate bond yields is explained by sovereign yields than by corporate bond ratings. When sovereign yields are high, their importance in pricing corporate bonds declines. In these states, for advanced economies' borrowers, the importance of corporate ratings increases. There is a small upward trend in the importance of corporate ratings over time.Citation
Bevilaqua, Julia, Galina Hale, and Eric Tallman. 2020. "Corporate Yields: Effect of Credit Ratings and Sovereign Yields." AEA Papers and Proceedings, 110: 499-503. DOI: 10.1257/pandp.20201008Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- G12 Equities; Fixed Income Securities
- G24 Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill