In Search of Distress Risk in Emerging Markets

75 Pages Posted: 26 May 2020 Last revised: 11 May 2023

See all articles by Gonzalo Asis

Gonzalo Asis

University of North Carolina (UNC) at Chapel Hill

Anusha Chari

University of North Carolina (UNC) at Chapel Hill - Department of Economics; National Bureau of Economic Research (NBER); University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School; Centre for Economic Policy Research (CEPR)

Adam Haas

University of North Carolina (UNC) at Chapel Hill

Date Written: May 2020

Abstract

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.

Suggested Citation

Asis, Gonzalo and Chari, Anusha and Haas, Adam, In Search of Distress Risk in Emerging Markets (May 2020). NBER Working Paper No. w27213, Available at SSRN: https://ssrn.com/abstract=3609665

Gonzalo Asis (Contact Author)

University of North Carolina (UNC) at Chapel Hill ( email )

102 Ridge Road
Chapel Hill, NC NC 27514
United States

Anusha Chari

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

McColl Building
Chapel Hill, NC 27599-3490
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Adam Haas

University of North Carolina (UNC) at Chapel Hill

Chapel Hill, NC

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