Recovery Ratios and Survival Times for Corporate Bonds
July 1, 1997
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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.
Subject: Asset and liability management, Asset valuation, Bonds, Corporate bonds, Financial institutions, Return on investment, Stocks, Treasury bills and bonds
Keywords: absolute priority, Asset valuation, bond characteristic, bond issue, Bonds, Corporate bonds, corporate default, coupon bond, defaulted bond, high-yield universe, issue amount, recovery ratio, Stocks, survival time, Treasury bills and bonds, WP
Pages:
32
Volume:
1997
DOI:
Issue:
084
Series:
Working Paper No. 1997/084
Stock No:
WPIEA0841997
ISBN:
9781451850604
ISSN:
1018-5941
