German Mittelstand Bonds: Yield Spreads and Liquidity

24 Pages Posted: 16 Oct 2015

See all articles by Sebastian Utz

Sebastian Utz

University of St. Gallen - School of Finance

Martina Weber

University of Regensburg - Department of Finance

Maximilian Wimmer

University of Regensburg; University of Mannheim - Finance Area

Date Written: October 15, 2015

Abstract

We estimate a cross-sectional model of the yield spreads of German Mittelstand bonds as a function of liquidity measures as well as a number of variables that control for both the characteristics of the issuing firm and the bond characteristics. Our results show a significant positive effect of illiquidity on the yield spread, which persists after controlling for the risk of the bond. Economically, the size of the liquidity premium of Mittelstand bonds is approximately twice the size of speculative grade US corporate bonds. Our findings are robust to different measures of liquidity and potential endogeneity biases.

Keywords: German Mittelstand Bond, Liquidity, Yield Spread, SME, Minibonds

JEL Classification: G12, G32

Suggested Citation

Utz, Sebastian and Weber, Martina and Wimmer, Maximilian, German Mittelstand Bonds: Yield Spreads and Liquidity (October 15, 2015). Available at SSRN: https://ssrn.com/abstract=2674534 or http://dx.doi.org/10.2139/ssrn.2674534

Sebastian Utz (Contact Author)

University of St. Gallen - School of Finance ( email )

Unterer Graben 21
St.Gallen, CH-9000
Switzerland

Martina Weber

University of Regensburg - Department of Finance ( email )

Regensburg, 93040
Germany

Maximilian Wimmer

University of Regensburg ( email )

Universitaetsstrasse 31
Regensburg, 93053
Germany
+49 941 943 2672 (Phone)

HOME PAGE: http://www-finance.uni-regensburg.de/Team/Maximilian-Wimmer.html

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

HOME PAGE: http://cf.bwl.uni-mannheim.de/

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