Is Recovery Risk Priced in Debt Contracts?
The Roles of Bank Regulation, Corporate Governance and Credit Rating

ASIAIR > College of Management > Department of Finance > Proceedings > Item 310904400/63660

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Title:	Is Recovery Risk Priced in Debt Contracts? The Roles of Bank Regulation, Corporate Governance and Credit Rating
Authors:	Wenchien Liu, Peter Miu,Yuanchen Chang,Bogie Ozdemir
Contributors:	Department of Finance National Chengchi University,DeGroote School of Business McMaster University,Department of Finance National Chengchi University,BMO Financial Group
Keywords:	Recovery risk;Debt contracts;Bank regulation;Corporate governance;Credit rating
Date:	2009-12-01
Issue Date:	2013-08-07 01:23:29 (UTC+0)
Publisher:	Department of Finance National Chengchi University,DeGroote School of Business McMaster University,Department of Finance National Chengchi University,BMO Financial Group
Abstract:	We investigate whether recovery risk has affected the spread of debt contacts in the U.S. market. Using the actual realized recovery rates of defaulted debt instruments, we find that recovery risk is associated with the price of debt contracts, and this relationship is stronger for non-investment grade and weak corporate governance firms and more significant after commercial banks were allowed to participate in the underwriting business. We also control for endogeneity, potential omitted variables, individual effect for bank loans and corporate bonds, and model specification issues. Our results indicate that information asymmetry, market efficiency and legislative regime are important determinants for this pricing relationship.
Relation:	2010中部學術財金研討會論文發表
Appears in Collections:	[Department of Finance] Proceedings

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