Internal liquidity risk in corporate bond yield spreads
Journal
Journal of Banking and Finance
Journal Issue
35
Pages
978-987
Date Issued
2011-04
Author(s)
Abstract
The recent global financial crisis reveals the important role of internal liquidity risk in corporate credit risk. However, few existing studies investigate its effects on bond yield spreads. Panel data for the period from year 1993 through 2008 show that corporate internal liquidity risk significantly impacts bond yield spreads (and changes) when controlling for well-known bond yield determinant variables, traditional accounting measures of corporate debt servicing ability, cash flow volatility, credit ratings, and state variables. This finding indicates that internal liquidity risk should therefore be incorporated into bond yield spread modeling. © 2010 Elsevier B.V.
SDGs
Type
journal article