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Information uncertainty, information asymmetry and corporate bond yield spreads

Author

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  • Lu, Chia-Wu
  • Chen, Tsung-Kang
  • Liao, Hsien-Hsing

Abstract

This study examines the effects of information uncertainty and information asymmetry on corporate bond yield spreads using American data from 2001 to 2006. Empirical results of this study show that investors charge a significant risk premium for both information uncertainty and information asymmetry when controlling for variables well known in the literature. The results are robust even when controlling for credit ratings. Finally, information uncertainty and asymmetry help structural-form credit models explain the yield spreads of bonds with short maturities.

Suggested Citation

  • Lu, Chia-Wu & Chen, Tsung-Kang & Liao, Hsien-Hsing, 2010. "Information uncertainty, information asymmetry and corporate bond yield spreads," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2265-2279, September.
    • Handle: RePEc:eee:jbfina:v:34:y:2010:i:9:p:2265-2279
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    References listed on IDEAS

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