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Article
Publication date: 30 November 2015

Hyungsang Song and Joonhee Rhee

We study whether the integrity of local governments has effects on municipal bond coupon rate. We conjecture that higher integrity is associated with lower bond coupon rate. One…

56

Abstract

We study whether the integrity of local governments has effects on municipal bond coupon rate. We conjecture that higher integrity is associated with lower bond coupon rate. One of proxies for the integrity is the integrity index which Anti-Corruption and Civil Rights Commission of Korea announces annually. The high degree of the index implies high integrity. We also use the number of crimes by local government officials as the integrity measure. Empirical results show that Increasing a unit of integrity is equivalent to decreasing 0.34% of municipal coupon bond. The sensitivity of the integrity to municipal bond coupon rate is stronger before 2007-2008 financial crisis, when the coupon rate was higher, than after the crisis. Overall, our results imply that local governments could save financing cost by improving the integrity of the governments.

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Journal of Derivatives and Quantitative Studies, vol. 23 no. 4
Type: Research Article
ISSN: 2713-6647

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Available. Open Access. Open Access
Article
Publication date: 31 May 2016

Hyungsang Song and Bum J. Kim

This paper studies the impact of bank monitoring on the maturity structure of corporate debt issues using Korean firms listed on Korea Exchange from 2005 to 2011. We show that a…

26

Abstract

This paper studies the impact of bank monitoring on the maturity structure of corporate debt issues using Korean firms listed on Korea Exchange from 2005 to 2011. We show that a higher proportion of bank debt in the small and medium enterprises results in corporate debt of longer maturity. The close relationship between banks and SMEs creates information and alleviates information asymmetry problem of borrowing firms. However, banks less perform monitoring and screening as information creator in the relationship with big firms. Because big firms have information asymmetry less than SMEs, and they suffer less problems from information asymmetry when contracting debt. The Probit regression shows that the Bank-Firm relationship increases possibility of issuing corporate debt of longer maturity in SMEs, and it supports the results of regressions above.

Details

Journal of Derivatives and Quantitative Studies, vol. 24 no. 2
Type: Research Article
ISSN: 2713-6647

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