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Home | Events Archive | Marking to Market Corporate Debt
Seminar

Marking to Market Corporate Debt


  • Series
    Array
  • Speaker(s)
    Lukas Schmid (USC Marshall School of Business, United States)
  • Field
    Finance, Finance
  • Location
    Online
  • Date and time

    October 13, 2020
    16:45 - 18:00

Abstract: Much of theoretical and empirical research in finance revolves around corporate debt. Theoretical work often makes predictions about market values of debt, while empirical measurement using standard datasets often reflects book values.

In this paper, we propose to close this gap. We construct a rich dataset on debt market valuations by carefully matching data on corporate bond and loan secondary market transactions. We document significant discrepancies between market and book values, especially for distressed firms, and use our data to revisit a number of empirical patterns involving corporate debt. Using a market-based measure of Tobin’s Q we find little evidence for investment cash-flow sensitivity in our data, and find that using market debt values significantly improves default prediction. In asset pricing tests, we find a leverage premium, but no evidence for a value premium after controlling for market leverage.

Link to the seminar:
https://eur-nl.zoom.us/j/95963617821?pwd=NkYxRDJHRUoycnRrZCtmaEdrd0lJZz09
Meeting ID: 959 6361 7821

to obtain the passcode please send an email to stolting@ese.eur.nl

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