{
  "title": "How Important Is Sovereign Risk in Determining Corporate Default Premia? The Case of South Africa",
  "publication": "IMF Working Papers, November 1, 2005",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/how-important-is-sovereign-risk-in-determining-corporate-default-premia-the-case-of-south-18634",
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  "summary": "The paper analyzes and quantifies the importance of sovereign risk in determining corporate default premia (yield spreads).",
  "sections": [
    {
      "heading": "Summary",
      "content": "- The paper analyzes and quantifies the importance of sovereign risk in determining corporate default premia (yield spreads) for South African local-currency-denominated corporate bonds.\n- It investigates whether the practice by rating agencies and banks of not rating companies higher than their sovereign (\"country or sovereign ceiling\") is reflected in corporate bond yields."
    },
    {
      "heading": "Main findings",
      "content": "- Sovereign risk appears to be the single most important determinant of corporate default premia in South Africa.\n- The sovereign ceiling (in local-currency terms) does not apply in the spreads of the industrial multinational companies in the sample.\n- Consistent with rating agency policy, the sovereign ceiling appears to apply in the spreads of most financial companies in the sample."
    },
    {
      "heading": "Subject areas and keywords",
      "content": "- Subjects: Bonds, Corporate bonds, Debt default, Emerging and frontier financial markets, Sovereign bonds\n- Keywords: coupon bond, default probability, emerging market, interest rate, risk premium, WP\n\n---\n\n Content in this bundle\n\n- Box 1. The Cost of Debt for an Emerging Market Borrower\n  - Box 1. The Cost of Debt for an Emerging Market Borrower (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Box 1. The Cost of Debt for an Emerging Market Borrower (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/how-important-is-sovereign-risk-in-determining-corporate-default-premia-the-case-of-south-18634"
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    "[Markdown version](/en/publications/wp/issues/2016/12/31/how-important-is-sovereign-risk-in-determining-corporate-default-premia-the-case-of-south-18634/index.md)",
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    "Authors: Marcel Peter, Martín Grandes",
    "Published: November 1, 2005",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451862362.001",
    "The paper analyzes and quantifies the importance of sovereign risk in determining corporate default premia (yield spreads) for South African local-currency-denominated corporate bonds.",
    "It investigates whether the practice by rating agencies and banks of not rating companies higher than their sovereign (\"country or sovereign ceiling\") is reflected in corporate bond yields.",
    "Sovereign risk appears to be the single most important determinant of corporate default premia in South Africa.",
    "The sovereign ceiling (in local-currency terms) does not apply in the spreads of the industrial multinational companies in the sample.",
    "Consistent with rating agency policy, the sovereign ceiling appears to apply in the spreads of most financial companies in the sample.",
    "Subjects: Bonds, Corporate bonds, Debt default, Emerging and frontier financial markets, Sovereign bonds",
    "Keywords: coupon bond, default probability, emerging market, interest rate, risk premium, WP",
    "**Box 1. The Cost of Debt for an Emerging Market Borrower**"
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      "title": "Box 1. The Cost of Debt for an Emerging Market Borrower",
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