| Title: |
The Determinants of Recovery Rates in the US Corporate Bond Market |
| Authors: |
Rainer Jankowitsch; Florian Nagler; Marti G. Subrahmanyam; Jel-classification G G |
| Contributors: |
The Pennsylvania State University CiteSeerX Archives |
| Source: |
http://people.stern.nyu.edu/msubrahm/papers/Recovery.September 2012.pdf. |
| Publication Year: |
2012 |
| Collection: |
CiteSeerX |
| Subject Terms: |
recovery rate; corporate bonds; liquidity |
| Description: |
We analyze the recovery rates of defaulted bonds in the US corporate bond market over the time period 2002 to 2010. Our data set is obtained from the Trade Reporting and Compliance Engine (TRACE) database maintained by the Financial Regulatory Authority (FINRA) and provides us with a complete set of traded prices and volumes around the default events. The analysis of the microstructure of trading activity allows us to estimate reliable market-based recovery rates. We investigate the relation between these recovery rates and a comprehensive set of bond characteristics, firm fundamentals and macroeconomic variables. In addition, we explore the effect of the liquidity of the individual bonds on their traded prices after default. Our panel regression analysis explains 64 % of the total variance in the recovery rates across bonds. We find that the type of default event, the seniority of the bond, and the industry in which the firm operates, are important determinants of the recovery rate. However, balance sheet ratios motivated by structural credit risk models, macroeconomic variables, and transaction costs metrics measuring liquidity, are of equal importance. |
| Document Type: |
text |
| File Description: |
application/pdf |
| Language: |
English |
| Relation: |
http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.420.9120; http://people.stern.nyu.edu/msubrahm/papers/Recovery.September 2012.pdf |
| Availability: |
http://citeseerx.ist.psu.edu/viewdoc/summary?doi=10.1.1.420.9120; http://people.stern.nyu.edu/msubrahm/papers/Recovery.September 2012.pdf |
| Rights: |
Metadata may be used without restrictions as long as the oai identifier remains attached to it. |
| Accession Number: |
edsbas.F26DB00A |
| Database: |
BASE |