CITRA   25434
CENTRO DE INNOVACION DE LOS TRABAJADORES
Unidad Ejecutora - UE
artículos
Título:
Corporate Credit Spreads and the Sovereign Ceiling in Latin America
Autor/es:
PANIGO, DEMIAN TUPAC; GRANDES, MARTÍN; PASQUINI, RICARDO
Revista:
Emerging Markets Finance and Trade
Editorial:
Taylor and Francis Online
Referencias:
Año: 2016
Resumen:
We exploit a panel of 72 US dollar-denominated bonds issued by Latin American publicly listed firms between 1996 and 2004, a period of regional financial crises, to answer the following three questions: 1) is sovereign risk an statistical and economically significant determinant of the corporate credit spread, controlling for firm and bond?specific characteristics?, 2) If yes, do market participants apply the sovereign ceiling rule adopted by rating agencies in the pricing of our bond market data?, and 3) how do market views compare with the rating agencies ceiling policy for each corporate bond? We find strong evidence of an economically and statistically significant effect of sovereign risk on corporate spreads across different panel econometric specifications and bonds. Moreover, markets do not apply the ceiling rule in 77% to 90% of the bonds we sample and these findings are consistent with rating agencies? policies towards the latter for about 50% of the firms. These results are robust to the inclusion of firm and bond-specific variables derived from the structural approach to credit risk and to the business cycle in each country.