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Evidence on the External Finance Premium from the US and Emerging Asian Corporate Bond Markets

Paul Mizen

University of Nottingham; Bank of England; Centre for Economic Policy Research (CEPR)

Serafeim Tsoukas

University of Glasgow

July 31, 2008

HKIMR Working Paper No. 14/2008

Empirical investigation of the external finance premium has been conducted on the margin between internal finance and bank borrowing or equities but little attention has been given to corporate bonds especially for the emerging Asian market. In this paper we hypothesize that balance sheet indicators of creditworthiness could affect the external finance premium for bonds as they do for premia in other markets. Using bond-specific and firm-specific data for the United States, Hong Kong, China, Korea and Thailand during 1995-2005 we find that firms with better financial health face lower external finance premia in all countries. When we introduce firm-level heterogeneity we show that financial variables appear to be both statistically and quantitatively more important in the Asian market than in the US. Finally, the premium is more sensitive to firm-level variables during credit crunches, recessions and sudden stops than other periods, with stronger effects for the Asian bond market.

Number of Pages in PDF File: 28

Keywords: Financing Constraints, External Finance Premium, Emerging Asian Markets

JEL Classification: F32, F34, G32

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Date posted: August 8, 2008  

Suggested Citation

Mizen, Paul and Tsoukas, Serafeim, Evidence on the External Finance Premium from the US and Emerging Asian Corporate Bond Markets (July 31, 2008). HKIMR Working Paper No. 14/2008. Available at SSRN: https://ssrn.com/abstract=1212302 or http://dx.doi.org/10.2139/ssrn.1212302

Contact Information

Paul Mizen (Contact Author)
University of Nottingham ( email )
University Park
Nottingham, NG8 1BB
United Kingdom
+44 115 951 5479 (Phone)
+44 115 951 4159 (Fax)
Bank of England
Threadneedle Street
London, EC2R 8AH
United Kingdom
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Serafeim Tsoukas
University of Glasgow ( email )
Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom
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