NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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In Search of Distress Risk in Emerging Markets

Gonzalo Asis, Anusha Chari, Adam Haas

NBER Working Paper No. 27213
Issued in May 2020
NBER Program(s):Asset Pricing, Corporate Finance, International Finance and Macroeconomics

This paper employs a novel multi-country dataset of corporate defaults to develop a model of distress risk specific to emerging markets. The data suggest that global financial variables such as US interest rates and shifts in global liquidity and risk aversion have significant predictive power for forecasting corporate distress risk in emerging markets. We document a positive distress risk premium in emerging market equities and show that the impact of a global "risk-off" environment on default risk is greater for firms whose returns are more sensitive to a composite global factor.

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Document Object Identifier (DOI): 10.3386/w27213

 
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