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Modeling recovery rates of corporate defaulted bonds in developed and developing countries
Affiliation:1. College of Business Administration, University of Bahrain (Bh), Bahrain;2. IDRAC Business School, France;3. IPAG Business School, France;1. Institute of Finance, Warsaw School of Economics, Poland;2. Department of Banking, Insurance and Risk, Kozminski University, Poland;1. University of Economics Ho Chi Minh City, 59C Nguyen Dinh Chieu Street, District 3, Ho Chi Minh City, Viet Nam;2. CFVG Ho Chi Minh City, 91 Ba Thang Hai Street, District 10, Ho Chi Minh City, Viet Nam;3. Australian College of Applied Psychology, Level 11, 255 Elizabeth Street, Sydney, New South Wales, 2000, Australia;4. School of Business, Western Sydney University, Locked Bag 1797, Penrith, New South Wales, 2751, Australia;1. School of Finance, Southwestern University of Finance and Economics, Wenjiang District, Chengdu, Sichuan 611130, China;2. Accounting and Finance Department, College of Business & Public Policy, University of Alaska Anchorage, Anchorage, AK 99508-4614, USA;3. Research Institute of Economics and Management, Southwestern University of Finance and Economics, Wenjiang District, Chengdu, Sichuan 611130, China;1. DeGroote School of Business, McMaster University, DSB A210, Hamilton, ON L8S 4M4, Canada;2. DeGroote School of Business, McMaster University, DSB A105, Hamilton ON L8S 4M4, Canada
Abstract:This paper examines the determinants of recovery rates of corporate defaulted bonds in the emerging markets. We use data on defaulted bonds from Moody's ultimate recovery database over the period 2005–2015 to experiment the impact of the borrower characteristics added to the macroeconomic and the bond market conditions on recovery rates. We find evidence that bond recovery rates in emerging and developed countries do not depend on the same factors. Our results show that bond recovery rates in developing countries seem to depend much more on specific characteristics of firms. The financial crisis has affected more significantly subordinated bond recovery rates than secured bonds in emerging markets.
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