Does exchange rate exposure affect the pricing of corporate bonds?
This paper examines the impact and potential mechanisms of exchange rate exposure on corporate bond risk premiums using all listed company bonds issued in China from 2006 to 2019.The research findings indicate that higher exchange rate exposure of a company increases its bond risk premiums and expected default probability.Specifically,for one standard deviation increase in a company's exchange rate exposure,its bond risk premium increases by 5 basis points.Higher quality of information disclosure is expected to attenuate the positive correlation between exchange rate exposure and corporate bond risk premiums.More empirical evidence shows that exchange rate exposure increases the value loss that a company incurs in debt default events.A company's exchange rate exposure intensifies the conflict of interests between shareholders and bondholders,leading to more inefficient investments.In companies with stricter financing constraints,exchange rate exposure significantly increases the risk premium of their bonds.By leveraging the"811 Exchange Rate Reform",we identify the causal relationship between exchange rate exposure and corporate bond risk premiums.This study provides new evidence on the impact of exchange rate exposure on corporate bond financing behavior and explains the inherent logic of how exchange rate exposure affects bond risk premiums from the perspective of uncertainty and information asymmetry.
NETL
NSTL
万方数据
维普
