Effect of Issuer Credit Quality on Corporate Bond Returns of Some Selected Deposit Money Banks in Nigeria

Abstract

Research in the area of finance in developed economies has long identified issuer credit quality as critical concern to investors. However, this do not receive much attention in developing countries such as Nigeria until recently. Thus, this study investigates the effect of issuer credit quality on corporate bond returns of some selected deposit money banks (issuers) in Nigeria for the period 11 years (2005-2015). The descriptive and correlational research designs were used and the data for the study were collected from the annual reports and accounts of sampled DMBs, SEC publications and NSE fact book for the period of study. The Panel Regression Model was used for data analysis and the findings showed that, Issuer credit quality had a significant negative effect on the corporate bond returns of the sampled deposit money banks (DMBs) listed on the Nigerian Stock Exchange. Based on these findings, it is the recommended that policymakers and regulators of DMBs in Nigeria should ensure regular and consistent periodic credit rating as it restores investors’ confidence and that DMBs banks should ensure credible outlook that will reflect the quality of the corporate bond.

Keywords: Issuer credit Quality, Corporate bond returns, obligor's, Policymaker, Regulators

JEL Classification: G12, G21