Recovery Ratios and Survival Times for Corporate Bonds

Author/Editor:

Ivailo Izvorski

Publication Date:

July 1, 1997

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper analyzes the determinants of the recovery ratios and survival times (time until default) for U. S. corporate bonds. We show that seniority, the type of industry in which the firm operates, and the type of restructuring attempted after default are the major determinants of the cross-sectional distribution of individual bond recovery ratios. On an industry level, physical asset obsolescence, industry growth, and industry concentration are the most important factors. We also analyze survival times for corporate bonds and find that initial time to maturity and the general economic conditions at maturity and default explain a large fraction of the cross-sectional variation of survival times.

Series:

Working Paper No. 1997/084

Subject:

Asset and liability management Asset valuation Bonds Corporate bonds Financial institutions Return on investment Stocks Treasury bills and bonds

English

Publication Date:

July 1, 1997

ISBN/ISSN:

9781451850604/1018-5941

Stock No:

WPIEA0841997

Pages:

32

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