Information Uncertainty, Information Asymmetry and Corporate Bond Yield Spreads

55 Pages Posted: 18 Mar 2009

See all articles by Hsien-Hsing Liao

Hsien-Hsing Liao

National Taiwan University

Tsung-Kang Chen

National Chiao Tung University

Chia-Wu Lu

National Taiwan University - Department of Finance

Wu Yi-Chieh

affiliation not provided to SSRN

Date Written: March 17, 2009

Abstract

This study examines the effects of information uncertainty and information asymmetry on corporate bond yield spreads using American bond data from year 2001 to 2006. Empirical results show that corporate bond investors charge a significant risk premium on both information uncertainty and information asymmetry when controlling for well-known variables. The results are robust even when additionally controlling for corporate credit rating. Results also reveal that non-accounting related factors of information uncertainty and information asymmetry are more important determinants for bond yield spreads than an accounting one. Moreover, information uncertainty and information asymmetry help structural credit models in explaining yield spreads of bonds with short maturities.

Keywords: Information uncertainty, Information asymmetry, Yield spreads

JEL Classification: G14, G12

Suggested Citation

Liao, Hsien-Hsing and Chen, Tsung-Kang and Lu, Chia-Wu and Yi-Chieh, Wu, Information Uncertainty, Information Asymmetry and Corporate Bond Yield Spreads (March 17, 2009). Available at SSRN: https://ssrn.com/abstract=1362156 or http://dx.doi.org/10.2139/ssrn.1362156

Hsien-Hsing Liao (Contact Author)

National Taiwan University ( email )

1 Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

Tsung-Kang Chen

National Chiao Tung University ( email )

No. 1001, Dasyue Rd., East Dist.,
Hsinchu City, 300
Taiwan

Chia-Wu Lu

National Taiwan University - Department of Finance ( email )

1 Sec. 4, Roosevelt Road
Taipei, 106
Taiwan

Wu Yi-Chieh

affiliation not provided to SSRN

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