Bond Returns Research Articles

The 52-Week High, Downside Risk, and Corporate Bond Returns

The 52-Week High, Downside Risk, and Corporate Bond Returns

МОНІТОРИНГ СУЧАСНОГО СТАНУ ФОНДОВОГО РИНКУ УКРАЇНИ

The article monitors the stock market of Ukraine in the period 2019–2023. The definition of the concept of “stock market” is considered. Analyzed different periods, both before the full-scale invasion and during the war. The stock market in any country in the world is characterized by the number of issued financial instruments by business entities. It is also characterized by the volume of exchange trading in these instruments. The stock market is an indicator of the state of the country’s economy. It also performs specific functions in the financial policy of the country. Its development and increase in functionality is a priority task of the government. The development of the stock market of our country is based on the experience of the developed countries of the world. It should be noted that the stock market of our country is at the stage of formation, based on the volume and number of financial instruments with which operations are carried out on the market. Based on the MSCI classification, the stock market of our country belongs to the least developed category. This is due to certain restrictions introduced by the NBU for foreign investors, as well as their failure to perform their main functions properly. It is clear that the full-scale invasion of the Russian Federation, which took place in February 2022, had a negative impact on the capital market of our country. Based on the information provided by the National Commission for Securities and the Stock Market (NCSCFR) for the analyzed period, it is gradually recovering despite the hostilities taking place on the territory of our state. Thus, in comparison with 2019, in 2023, the volume and number of bond issues registered by NKCPFR increased, the volume of investment certificates of mutual investment funds increased, and the volume of exchange contracts with securities on domestic trading platforms increased. Transactions on exchange contracts with securities in most cases take place on the stock exchanges “Perespektiva” and PFTS. Positive developments are observed in all segments of the stock market. But it should be noted that in terms of trading instruments, the stock market of Ukraine has a low level of development. Full recovery and development of the capital market of our country is possible only after the end of the war.

Harnessing Green Bonds for Sustainable Development: An Empirical Impact and Insight

The study aims to discuss the role of green bonds in financing sustainable development projects, highlighting their significant positive impact on resource mobilization, attracting different types of investors and achieving ecological as well as social results. Making financial returns line up with good ecological results improves the transparency and credibility of financed projects. However, within the sustainable finance space, green bonds are shown to be a strong instrument despite some variation in their influence on societal development and dependence on regulatory frameworks. The findings from this study confirm theoretical assumptions that integrating environmental, social, and governance (ESG) aspects into financial decision making would channel capital to initiatives with substantial sustainability benefits. In conclusion, this analysis suggests that more comprehensive studies should be undertaken to overcome limitations associated with sample size; reliance on self-reported data; and the fact that it is a cross-sectional survey. Henceforth, future research should focus on longitudinal analyses; comparative evaluations of sustainable finance instruments; and more objective measures of impact so as to provide deeper knowledge about long-term effects and general consequences of green bond issues.

전환권 행사로 발행된 신주에 관한 신주 발행의 무효 사유와 무효 사유에 따른 쟁송 방법

The target judgment is that if there is a reason for invalidation in the issuance of convertible bonds, a lawsuit for invalidation of the issuance of convertible bonds may be filed, but after the filing period, the lawsuit for invalidation of the issuance of new shares cannot claim the reasons related to the issuance of convertible bonds, and only unique reasons for the exercise of convertible rights and the resulting issuance of new shares may be asserted. However, since the right to convert is a formative right, it is not easy to assume that there is a reason for invalidation in the exercise of the right to convert and the resulting issuance of new shares because new shares are issued without having to meet other requirements as long as the expression of intention to claim the conversion reaches the company. Defects in the exercise of conversion rights and the resulting issuance of new shares can be assumed, for example, if a convertible creditor issues new shares even though there is no intention of requesting conversion, if the party exercises the conversion right after the conversion claim period, or if the company misrepresents the conditions of the conversion and miscalculates the number of shares issued. Considering that such reasons are difficult to occur in practice, and that even if there is such a defect, it must be so serious that it is contrary to the nature of the stock company or the basic principles of the company law that it can be a reason for invalidation of the issuance of new shares, it is very difficult to win a victory after the party filed a lawsuit to invalidate the issuance of new shares due to the exercise of the right to convert and the resulting issuance of new shares. If new shares are issued due to the exercise of conversion rights, most of the reasons for invalidation of the issuance of new shares stem from the issuance of convertible bonds. The target judgment also recognizes exceptions when there are special circumstances in order to overcome the problem that the party's right to file a complaint is excessively reduced. Citing the legal principles mentioned in bonds with underwriting rights sentenced just before the target judgment was sentenced, the ruling recognizes an exception that “if a convertible bond is issued to a third party for the purpose of defending the management rights of major shareholders, and then a major shareholder acquires new shares by exercising the right to convert.” In this case, it is practically the same as issuing new shares to major shareholders for the purpose of defending management rights, and in reality, the issuance of new shares will infringe on shareholder rights or change governance structure of existing shareholders. The target judgment suggests that the criteria for the exception were issued to a third party for the purpose of defending the management rights of major shareholders, etc., and that the major shareholders, etc. exercised the right to convert by taking it over. I would like to examine whether the attitude of this subject judgment is reasonable and further examine the method of dispute for new shares issued due to the exercise of the right to convert.

Senior Non-preferred Bonds as an Instrument to Meet the MREL Requirement

The purpose of the article is to present the results of the first assessment of the senior non-preferred (SNP) bond market’s development in Poland. SNP bonds were introduced to facilitate meeting the banks’ MREL, which aims to build banks’ loss absorption and recapitalization capacity. At the same time, they are the next source of bank funding. The development of the SNP bond market has been initiated relatively recently with the full establishment of resolution systems and the introduction of the MREL requirement for banks. Although the first non-binding decisions to impose the MREL requirement were issued in 2016, the concept of SNP was formally introduced in 2017. In 2019, an amendment to the rules for determining the MREL requirement was adopted, which was implemented into the Polish legal framework in 2021, and in 2022, an amendment to the regulations on bonds was introduced, enabling the issuance of SNP bonds counted to MREL. Since then (2022), there has been a full legal framework for setting and maintaining the MREL requirement, and therefore full conditions for the development of this market in Poland. Therefore, it is justified to say that this market is relatively young. Moreover, it is under-investigated by scientists. This justifies the assessment of the potential scale of this market, its ability to achieve the goal for which it was created, as well as the premises and barriers to its development.
 Methodology. The research methods were quantitative analysis (calculation of the potential shortage of the MREL requirement and needs in the field of securities issuance based on reporting data) and qualitative analysis (in terms of assessing the challenges).
 Results of the research. The main determinant of its potential is the amount of MREL shortfall, which depends on the financial situation of banks and partly on the strategy of resolution authorities (responsible for setting the level of this requirement). The main challenges for the Polish SNP bond market are related to the prospects for further development of the banking sector and its environment (business and strategic). Nevertheless, it seems that the potential of the SNP bond market in Poland is underrated. The article contributes to general knowledge about bank funding sources.

Green bonds and sustainable business models in Nordic energy companies

As green bonds continue their dynamic growth trajectory to finance the transition to a more sustainable future, a gap in the literature remains on how companies have overcome internal barriers to successful green bond issuance. This case-based study analyzes how five Nordic energy companies have successfully surmounted internal barriers to issuing green bonds by leveraging their sustainable business models. The findings show a number of antecedental features of sustainable business models prior to green bond issuance including: a focus on environmental betterment as part of the mission and strategy; investments into assets that provide an environmental benefit and a divestiture of those that do not; the active pursuit to reduce CO2 emissions through R&D; and, strong governance mechanisms. Throughout the process of issuing green bonds, companies introduce changes to their sustainable business models, most notably, green finance frameworks and additional governance practices. As a result of the green bond issuance, reinforcing choices and consequences emerge to create virtuous cycles. In turn, the virtuous cycles support environmental objectives and foster more economic and environmental value for the company, investors, and society. Our study offers a process-based theoretical outline of how sustainable financing can make a business model more sustainable by removing internal barriers and strengthening company strategy, asset choices, and governance.

Bond market development and economic growth nexus in developing countries: a GMM approach

PurposeThis study examines the nexus of bond market development and economic growth from 2015 to 2022.Design/methodology/approachThe system-generalized method of moments (GMM) is employed on economic growth, government market capitalization, corporate market capitalization, bond yield, interest rate spread, trade openness and investment level.FindingsThe findings show that the government bond market, corporate bond capitalization and bond yield positively impact the gross domestic product (GDP). The results equally reveal a causal link between the corporate bond market, bond yield and GDP.Research limitations/implicationsGovernments should emphasize creating, developing and sustaining bond markets in the economies of developing countries to boost economic activity by promoting structural transformation. Policymakers should improve the implementation of existing rules and regulations while complementing them with new ones since well-developed bond markets provide alternative sources of financing that make economies financially resilient. Policymakers should encourage the issuance of corporate bonds to enhance the efficiency of the capital markets and mobilize funds for economic growth stimulation. Governments and corporations should diversify their sources of funding into the bond markets since the bond yields are favorable to economic growth.Originality/valueEarlier studies presented arguable results on the bond market development and economic growth nexus. Several findings indicate a positive link; others give a negative link between bond market development and economic growth. Some show causal directions, while other reveal none. The contradictory results motivate research. This research results contribute to the literature in that the government bond market, corporate bond capitalization and bond yield positively impact the GDP of developing nations.

Impact of project financiers’ strategies on de-risking infrastructural projects: A conceptual review

Infrastructure projects encounter significant risks which often deter financiers from investing in them. To address these risks, financiers have developed and applied several strategies aimed at encouraging investment. Therefore, this study reviewed several literatures from the past ten years on the strategy used by both public and private financiers to reduce risks and encourage investment in infrastructure projects. From the literature reviewed, several strategies such as risk allocation & mitigation, blended finance, issuance of green bonds, and stakeholders’ engagement in project selection were utilized by major project financiers in making investment decisions. Other factors such as political stability, economic indicators, insurance & guarantees, and legal & regulatory framework were also identified to positively impact investment decisions on infrastructure projects. From the findings, a conceptual framework linking the project financiers’ proxies (risk allocation & mitigation, blended finance, issuance of green bond, and stakeholders’ engagement in project selection) to that of the proxies of de-risking (political stability, economic indicators, insurance & guarantees, and legal & regulatory framework) was developed with the outcome showing the positive impact of both proxies on project financiers’ investment decision. The magnitude of the impact of each proxy on investment decisions is a subject of future study.

Фінансування дефіциту державного бюджету України в умовах воєнного стану

As a country that faces constant economic turbulence, Ukraine is dealing with several challenges. This includes a significant increase in the deficit of budget resources while needing to finance military expenses, all while trying to maintain macroeconomic stability. This article focuses on the specifics of financing the deficit of the state budget of Ukraine during martial law. The financing of the state budget deficit is analyzed in terms of the classification of budget financing by the type of creditor and the type of debt obligation. These indicators were significantly affected by the military challenges in 2022 and the first half of 2023. The article also covers the budget deficit’s coverage analysis at the expense of revenues from the privatization of state property and the issuance of military government bonds, which gained popularity in Ukraine. The authors emphasized the importance of cooperation between the state and IFIs and other institutions as an essential source of financing for overcoming the deficit of the state budget. This form of cooperation is necessary for maintaining the country’s financial stability and resilience to face complex challenges. The article examines the measures to cover the budget deficit in military conditions, including the need to carry out budget system reforms, cost optimization, searching for new sources of income, expanding the tax base, and improving the efficiency of the tax system, which can provide additional funds in the budget. Other measures include financial transparency, investment stimulation, budget consolidation, increasing transparency, fighting corruption, improving conditions for entrepreneurship, achieving low and stable inflation, expanding the tax base, and speeding up the privatization of state enterprises.

Have credit risk mitigation warrants eased the difficulty and expensive of financing for private enterprises?

ABSTRACT The Credit Risk Mitigation Warrants (CRMW), as the primary tools for supporting bond financing for Chinese private enterprises, have the capacity to guide the market in reducing risk concerns associated with private enterprises and alleviating their financing challenges. Consequently, CRMW has garnered sustained attention and support within the bond market. Few empirical studies have analyzed the effects of CRMW on private enterprise bonds in the Chinese market. Using a sample of 1,171 bonds issued by 210 private firms between 2018 and 2020, we conducted an empirical analysis to examine CRMW’s effect on the enthusiasm for private enterprise bond subscriptions and issuance costs. We find that private enterprises issuing bonds with CRMW can significantly increase the enthusiasm for bond subscriptions. CRMW’s effects in expanding such enthusiasm are more evident among high-rated private enterprises. The CRMW is more effective in non-listed, smaller-asset enterprises, while the effects of reducing bond issuance costs are more significant in lower-rated private enterprises. This study provides precise empirical evidence for lowering the difficulty of private corporate bond financing for CRMW. The study also addresses the debate in existing literature regarding whether CRMW reduces the cost of debt financing for private enterprises, and provides references for policy improvements related to CRMW.

An Empirical Study on the Impact of Convertible Bond Financing on Corporate Performance Taking China's A-Share Listed Companies as an Example

Convertible bond is a financing means of both stock and bond, and it is also a refinancing means of listed companies in our country. Based on the study of convertible bonds, this paper analyzes the impact of convertible bond issuance on the financial performance of the issuer, and through the analysis of different financial indicators of China's A-share listed companies, draws the following conclusions: in 2017 and beyond, convertible corporate bonds can bring significantly higher return on total assets, and convertible corporate bonds have forward utility.And put forward the following reference suggestions, for the regulatory authorities, not only to gradually relax the threshold of bond issuers, but also to strengthen supervision. For investors, convertible bond financing can be used as a criterion to screen non-financial companies with a good business environment, and they should also continue to pay attention to the use of funds issued by convertible corporate bond companies.

Determinants of Short- and Long-Term Commercial Lending Rates in Peru, 2010–2022

Short- and long-term interest rates are crucial for investment and, thus, business dynamism. The injection of money depends on the ability to promote cash flows through credit which boosts productive sectors. In the last decade, among Latin American countries, Peru has stood out for its key financial system and macroeconomic stability characteristics. The Central Reserve Bank of Peru (BCRP) plays a key role in setting the reference rate given its autonomy and strong institutional trust. However, the mixed pension system injects liquidity into the financial system through its private contributions. For the purposes of this study, an autoregressive econometric model of distributed lags (ARDL) was employed. The findings reveal that the reference rate set by the BCRP establishes a long-term relationship for both short and long-term rates, empirically demonstrating the effectiveness of monetary policy. Additionally, the liquidity provided by the pension system triggers an immediate shock response in determining the short-term rate. It is also observed that the issuance of sovereign bonds is a robust tool in determining the long-term rate due to its facilitation of credit access. This research is relevant for identifying macroeconomic and financial variables and guiding the formulation of macroeconomic policies.

Systemic Risk and Monetary Policy: The Haircut Gap Channel of the Lender of Last Resort

Abstract We show that lender of last resort (LOLR) policy exacerbates bank interconnectedness. Using novel micro-level data, we analyze LOLR’s haircut gaps: the differences between the private market and central bank haircuts. LOLR policy incentivizes banks to increase pledging and holdings of higher haircut-gap bonds, especially those issued by domestic and systemically important banks. Effects only apply to banks, not to nonbanks without LOLR access. LOLR funding revives bank bond issuance associated with higher haircut gaps and increases the subsequent correlation between pledging and issuing banks’ bond prices, in particular during periods of low-market returns and for domestic, systemically important banks.

Tanggung Jawab Wali Amanat Kepada Pemegang Obligasi Dalam Hal Wali Amanat Melakukan Kelalaian Terhadap Kontrak Perwaliamanatan

The trustee is the party responsible for assisting the implementation of bond issuance and transactions in the capital market. In the implementation of bond issuance, the role of the trustee is crucial in creating legal protection for bondholders. The purpose of this study is to clearly understand the duties and responsibilities of the trustee towards bondholders as well as the legal protection rights possessed by bondholders if the trustee commits acts of negligence under capital market law. The results showed that the trustee must make compensation as a form of legal protection to bondholders in accordance with the regulations contained in the laws and regulations in the field of capital market and bondholders who feel aggrieved can ask the trustee for compensation by means of consensus deliberation or dispute resolution at an alternative dispute resolution institution established by the Service Authority Finance (OJK). Bondholders can also prove to court because the losses suffered are the result of the negligence of the trustee who represents them in a bond issuance process.

Research on the interplay between green finance and manufacturing sustainability outcomes: insights for low-carbon economy in the post-COVID-19 era.

In the quest to strengthen resilient and sustainable recovery in the post-COVID-19 era, there is a huge requirement for manufacturing firms to adopt green finance which is dominated by green bond issuance. Nevertheless, published studies that provide insights on factors that influence the issuance of green bonds within manufacturing firms in the post-COVID-19 era and the impact on sustainable outcomes are currently non-existent. Therefore, this study analyzed the interrelationships that exist between the influencing factors of green bond issuance within manufacturing firms using decision-making trial and evaluation laboratory (DEMATEL) and data from Nigerian manufacturing firms. Then, a structural model of their importance levels was illustrated using interpretive structural modeling (ISM) while their impact on manufacturing sustainability outcomes was estimated with the aid of evaluation based on distance from average solution (EDAS). The study results highlight the key influencing factors of green bond issuance as environmental competencies, policy framing, low corruption, public awareness, and government support thereby signifying the criticality of strong institutions in facilitating green finance in the post-pandemic era. Besides, the study results demonstrate that green finance can significantly strengthen manufacturing sustainability in the post-COVID-19 era via green bonds by enhancing sustainable waste management, technological growth, and quality improvement as well as reducing carbon emissions. The study findings can provide a reference to decision-makers in manufacturing enterprises to predict scenarios and enact policies that facilitate the success of green finance in the post-COVID-19 era to further develop a low-carbon economy and increase competitive edge.

State corporate tax changes and bond pricing: U.S. evidence

In this study, we empirically investigate whether and to what extent state tax changes may affect the cost of debt. We employ staggered changes in state corporate income tax rates in the U.S. as exogenous shocks and estimate the effects of these state tax changes on bond at-issue yield spreads. We find a significant and positive relation between bond yield spreads and state tax increases but an insignificant relation between bond yield spreads and state tax decreases. On average, tax increases result in an increase of 34 basis points in the average bond yield spread. In addition, we document that bond investors demand higher yield spreads because tax increases aggravate firms' default risk by increasing firm leverage and return volatility. Moreover, we extend our analysis to equity holders and report a negative relation between stock market reaction to bond issuances subject to state tax increases.

Does State Ownership Impact Green Bond Issuance? International Evidence

Nous analysons dans cette étude l’actionnariat des entreprises émettrices d’obligations vertes dans 18 pays entre 2013 et 2017. En utilisant des régressions et un échantillon apparié d’entreprises émettrices d’obligations vertes et non vertes, nous montrons que la présence d’un actionnariat étatique est un facteur déterminant de la décision d’émettre une obligation verte. Nos résultats montrent également que le lien entre l’actionnariat étatique et les émissions d’obligations vertes s’est renforcé après l’accord de Paris, notamment dans les pays disposant d’un cadre institutionnel faible. Nous avons réalisé divers tests de robustesse pour garantir la validité de nos résultats, selon lesquels l’implication de l’Etat est cruciale pour favoriser les engagements environnementaux des entreprises.

An empirical analysis of corporate sustainability bonds

AbstractThis study examines the performance of worldwide corporate sustainability bonds issued from 2014 to 2020. Unlike traditional bonds, the proceeds of sustainability bonds are utilised for financing projects to bring about environmental and socio‐economic benefits. We analyse the short‐term market reaction to announcements of sustainability and traditional bond issuance and document that the stock market reaction to an announcement of sustainability bonds is stronger than that for traditional bonds. We also find that multiple issuers of sustainability bonds achieve a more favourable market reaction than single issuers. Finally, we examine if environmental, social and governance (ESG) scores can positively and significantly impact the corporate performance of firms through the lens of sustainability bond issuances. We find that ESG scores are the primary performance drivers for firms, and the effect is more pronounced for firms that issue sustainability bonds. Overall, the results suggest that issuers of sustainability bonds show their commitment towards environmental and societal goals and thus benefit from favourable stock market reactions.

Corporate green bond issuance and high-quality corporate development

Green bonds have both "green" and "financial" attributes and are an essential part of the green financial system. This paper empirically examines the impact of corporate green bond issuance on their green total factor productivity. The research results indicate that the issuance of green bonds by enterprises can significantly enhance their green total factor productivity. Heterogeneity analysis results show that this promoting effect is more pronounced when the enterprise's financing constraint level is high and in regions with a higher level of marketization.

РОЛЬ ЗЕЛЕНИХ ОБЛІГАЦІЙ У ФІНАНСУВАННІ СТАЛОГО РОЗВИТКУ

Активне формування ринків зелених облігацій пов’язано з виконанням завдань кліматичного переходу відповідно до Цілей сталого розвитку ООН у частині досягнення умов кліматичної нейтральності. Ринок зелених облігацій може надати Україні доступ до глобальних фінансових ресурсів для цілей післявоєнної відбудови і структурної перебудови національної економіки на якісно новому технологічному рівні на принципах сталого розвитку.Визначено, що проблематику наукових досліджень ринків зелених облігацій зосереджено навколо питань оцінювання їх впливу на сталий розвиток, стандартизації зелених облігацій, оцінювання премії за ризик таких облігацій, впливу емісії зелених облігацій на розвиток фондових ринків, обґрунтувань передумов ефективного розвитку ринків зелених облігацій.Систематизовано види зелених облігацій за типом забезпечення активами емітента. Узагальнено рекомендації міжнародних організацій щодо розвитку каналів залучення приватного капіталу у фінансування проєктів сталого розвитку. Акцентовано увагу на проблемі стандартизації зелених облігацій відповідно до міжнародних принципів, а саме: цільове призначення облігацій, прозорість звітності емітента, наявність механізмів управління залученими коштами, оцінювання результатів проєкту. Встановлено, що впровадження таких стандартів полегшує надходження коштів інвесторів у цільові проєкти сталого спрямування і дозволяє контролювати цей процес.Визначено, що найбільш проблемними питаннями розвитку ринку зелених облігацій в Україні є їх стандартизація, запровадження стандартів фінансової і нефінансової звітності щодо розкриття кліматичної інформації, запровадження державних стимулів для емітентів зелених облігацій та інвесторів, розвиток інфраструктури фондового ринку і диверсифікація фінансових інструментів, посилення прав інвесторів, популяризація ідей сталого відновлення в суспільстві.