Return predictability in the corporate bond market along the supply chain

Long Chen; Gaiyan Zhang; Weina Zhang

doi:10.2139/ssrn.2427136

Return predictability in the corporate bond market along the supply chain

Long Chen, Gaiyan Zhang, Weina Zhang

University of Missouri-St. Louis

Research output: Contribution to journal › Article › peer-review

Abstract

We explore how efficiently new information transmits along the supply chain in corporate bond market. We find a strong predictability of the lagged bond returns of customers for related firm- and industry-level future bond returns. This is likely due to investors’ inattention to cash-flow related news along the supply chain. Moreover, the lagged bond returns of suppliers only predict the future bond returns of those firms that have less bargaining power. Overall, our results suggest that information along the supply chain travels more gradually in the bond market than the stock market.

Original language	American English
Journal	Journal of Financial Markets
Volume	29
DOIs	https://doi.org/10.2139/ssrn.2427136
State	Published - Jan 6 2016

Keywords

Cash Flow
Corporate Bonds
Credit Rating
Credit Risk
Earnings
Information
Return Predictability
Supply Chain

Disciplines

Economics
Finance

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10.2139/ssrn.2427136License: Unspecified

Cite this

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title = "Return predictability in the corporate bond market along the supply chain",

abstract = " We explore how efficiently new information transmits along the supply chain in corporate bond market. We find a strong predictability of the lagged bond returns of customers for related firm- and industry-level future bond returns. This is likely due to investors{\textquoteright} inattention to cash-flow related news along the supply chain. Moreover, the lagged bond returns of suppliers only predict the future bond returns of those firms that have less bargaining power. Overall, our results suggest that information along the supply chain travels more gradually in the bond market than the stock market. ",

keywords = "Cash Flow, Corporate Bonds, Credit Rating, Credit Risk, Earnings, Information, Return Predictability, Supply Chain",

author = "Long Chen and Gaiyan Zhang and Weina Zhang",

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AB - We explore how efficiently new information transmits along the supply chain in corporate bond market. We find a strong predictability of the lagged bond returns of customers for related firm- and industry-level future bond returns. This is likely due to investors’ inattention to cash-flow related news along the supply chain. Moreover, the lagged bond returns of suppliers only predict the future bond returns of those firms that have less bargaining power. Overall, our results suggest that information along the supply chain travels more gradually in the bond market than the stock market.

KW - Cash Flow

KW - Corporate Bonds

KW - Credit Rating

KW - Credit Risk

KW - Earnings

KW - Information

KW - Return Predictability

KW - Supply Chain

UR - https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2686028_code761873.pdf?abstractid=2427136&mirid=3

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JO - Journal of Financial Markets

JF - Journal of Financial Markets

ER -

Return predictability in the corporate bond market along the supply chain

Abstract

Keywords

Disciplines

Access to Document

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