Three Essays on Corporate Finance and Bond Markets
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Authors
Wang, Anni
Issue Date
2025
Type
Dissertation
Language
en_US
Keywords
Bond returns , Corporate bonds , Corporate finance , Yield spreads
Alternative Title
Abstract
The first chapter investigates the impact of a firm’s market value of real estate on theirunsecured bond yield spreads. As the market value of a firm’s real estate increases so too
does the firm’s collateral value. A higher collateral value can enhance recovery rates and
reduce expected default losses, particularly in the case of real estate assets that are more
easily redeployed in the secondary market, thereby lowering yield spreads. Conversely,
the costly reversibility of real estate assets can increase a firm’s risk premium, potentially
leading to higher yield spreads. In this paper we find a negative relationship between real
estate values and corporate yield spreads, supporting the collateral value channel. The
findings remain significant after controlling for standard determinants of yield spreads and
employing various robustness tests. Moreover, the collateral effect is more pronounced for
bonds with higher default and liquidity risk. Our research highlights that the collateral
value of corporate real estate, not explicitly pledged, is priced in the unsecured corporate
debt. The second chapter examines the impact of debt refinancing risk on expected corporatebond returns. The immediacy of refinancing maturing debt can elevate rollover risk premia,
resulting in higher future bond returns, while a firm’s short-term debt can serve as a
discipline device to alleviate agency costs of debt, reducing potential risk for bondholders.
We identify a strong positive effect of debt refinancing risk, as measured by refinancing intensity,
on excess bond returns in the subsequent year, supporting the rollover risk channel.
Such an effect intensifies with heightened default and liquidity risk, and in the presence
of credit market freezes and elevated interest rates. Furthermore, the premium associated
with refinancing risk reflects a higher exposure to credit and liquidity risk. Our study
provides new empirical evidence that the rollover risk of short-term debt is priced in the
corporate bond market. In the third chapter, we study the effect of firm-level vertical integration on corporateyield spreads. Vertical integration can lower transaction costs and enhance a firm’s control
over its supply chain, thereby mitigating supply chain risk and leading to lower yield
spreads. However, it may also lead to asset specificity, which can reduce the liquidation
value of assets and increase investment uncertainty, potentially resulting in higher yield
spreads. We find that firms with greater vertical integration exhibit lower bond yield
spreads. This effect is more pronounced for companies facing elevated supply chain risk,
supporting the supply chain risk channel. Amid global supply chain disruptions such as
the Covid-19 pandemic and the U.S.-China trade war, vertical integration takes on an even
more important role in reducing credit spreads.