Temporal Resolution of Uncertainty and Corporate Debt Yield: An Empirical Investigation

38 Pages Posted: 11 Nov 2008

See all articles by Alexander Reisz

Alexander Reisz

Office of the Comptroller of the Currency

Date Written: November 1999

Abstract

This paper is intended to measure Reisz's (1999) empirical implication about bond yields against data: yields demanded on corporate debt should be higher the later the uncertainty facing the firm is resolved. We conduct our study looking at new bond issues made by industrial corporations between 1987 and 1996. Based on this sample, we find strong evidence that firms with more delayed resolution of uncertainty offer higher yields once default and overall risks have been controlled for. We also find that the maturity premium on corporate bonds is monotonic in the pattern of Temporal Resolution of Uncertainty (TRU) facing the firm. Both results are mitigated for firms whose managers enjoy fewer information asymmetries. We also find that firms with more delayed TRU rely less heavily on debt and tend to issue shorter-term bonds.

Suggested Citation

Reisz, Alexander, Temporal Resolution of Uncertainty and Corporate Debt Yield: An Empirical Investigation (November 1999). NYU Working Paper No. FIN-99-043. Available at SSRN: https://ssrn.com/abstract=1297792

Alexander Reisz (Contact Author)

Office of the Comptroller of the Currency ( email )

400 7th Street SW
Washington, DC 20219
United States
(202) 874 6167 (Phone)
(202) 874 5394 (Fax)

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