Default Risk Characteristics of Construction Surety Bonds

Hyeongjun Kim, Hoon Cho, Doojin Ryu
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引用次数: 8

Abstract

A construction surety bond helps a development project to proceed smoothly. This financial product has supported the rapid economic growth of several emerging markets, including the Republic of Korea. In this study, by using a unique and high-quality dataset, the authors analyze construction surety bonds to estimate their default probabilities. The results have several empirical implications. First, firm characteristics, such as firm size and leverage ratio, influence the surety bond default risk; the safety and liquidity measure are especially robust indicators. The result also confirms that account receivables can increase the default risk. Second, endogenous variables of the surety bond are also robust indicators of default. Because a construction surety bond itself has additional information about a company starting a new construction project, those variables can contribute to indicating default risk. Finally, default forecasting based on this model has much greater forecasting power than models based on the credit rating. TOPICS: Project finance, statistical methods, credit risk management, emerging markets
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工程担保债券的违约风险特征
建设保证金有助于开发项目的顺利进行。这一金融产品支持了包括大韩民国在内的几个新兴市场的快速经济增长。在本研究中,通过使用独特的高质量数据集,作者分析了建筑担保债券,以估计其违约概率。研究结果有几个实证意义。一是企业规模、杠杆率等企业特征对担保债券违约风险的影响;安全性和流动性指标是特别有力的指标。结果也证实了应收账款会增加违约风险。其次,担保债券的内生变量也是违约的稳健指标。由于建筑担保债券本身具有有关公司启动新建筑项目的额外信息,因此这些变量有助于指示违约风险。最后,基于该模型的违约预测比基于信用评级的模型具有更强的预测能力。主题:项目融资、统计方法、信用风险管理、新兴市场
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来源期刊
Journal of Fixed Income
Journal of Fixed Income Economics, Econometrics and Finance-Economics and Econometrics
CiteScore
1.10
自引率
0.00%
发文量
23
期刊介绍: The Journal of Fixed Income (JFI) provides sophisticated analytical research and case studies on bond instruments of all types – investment grade, high-yield, municipals, ABSs and MBSs, and structured products like CDOs and credit derivatives. Industry experts offer detailed models and analysis on fixed income structuring, performance tracking, and risk management. JFI keeps you on the front line of fixed income practices by: •Staying current on the cutting edge of fixed income markets •Managing your bond portfolios more efficiently •Evaluating interest rate strategies and manage interest rate risk •Gaining insights into the risk profile of structured products.
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