Pricing of project finance bonds: a comparative analysis of primary market spreads
Autor(a) principal: | |
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Data de Publicação: | 2023 |
Outros Autores: | |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10400.14/41309 |
Resumo: | This paper provides a comparative analysis of project finance (PF) and traditional corporate finance (CF) bond spreads and pricing. Using a cross-section of 47,196 bonds issued worldwide in the 1993–2020 period, we show that PF and CF bonds are differently priced, PF bonds have higher spreads than comparable CF bonds, and although ratings are the most important pricing determinant for PF and CF bonds at issuance, investors rely on other contractual, macroeconomic, and firms' characteristics beyond these ratings. Our results do not support the hypothesis of PF transactions as mechanisms of reducing sponsoring firms' funding costs: the cost of borrowing affects financing choices and PF transactions' weighted average spread is higher than that of comparable CF bond deals. We also find that economies of scale, risk management, and information asymmetry arguments affect sponsoring firms' choice between PF and CF transactions. |
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Pricing of project finance bonds: a comparative analysis of primary market spreadsBond pricingProject financeCorporate bondsCost of borrowingDebt choiceThis paper provides a comparative analysis of project finance (PF) and traditional corporate finance (CF) bond spreads and pricing. Using a cross-section of 47,196 bonds issued worldwide in the 1993–2020 period, we show that PF and CF bonds are differently priced, PF bonds have higher spreads than comparable CF bonds, and although ratings are the most important pricing determinant for PF and CF bonds at issuance, investors rely on other contractual, macroeconomic, and firms' characteristics beyond these ratings. Our results do not support the hypothesis of PF transactions as mechanisms of reducing sponsoring firms' funding costs: the cost of borrowing affects financing choices and PF transactions' weighted average spread is higher than that of comparable CF bond deals. We also find that economies of scale, risk management, and information asymmetry arguments affect sponsoring firms' choice between PF and CF transactions.Veritati - Repositório Institucional da Universidade Católica PortuguesaGuedes, Sebastião S.Pinto, João M.2023-06-05T09:34:59Z2023-10-012023-10-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.14/41309eng0929-119910.1016/j.jcorpfin.2023.10242985161342337001016750000001info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-07-12T17:46:52Zoai:repositorio.ucp.pt:10400.14/41309Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T18:33:58.006661Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Pricing of project finance bonds: a comparative analysis of primary market spreads |
title |
Pricing of project finance bonds: a comparative analysis of primary market spreads |
spellingShingle |
Pricing of project finance bonds: a comparative analysis of primary market spreads Guedes, Sebastião S. Bond pricing Project finance Corporate bonds Cost of borrowing Debt choice |
title_short |
Pricing of project finance bonds: a comparative analysis of primary market spreads |
title_full |
Pricing of project finance bonds: a comparative analysis of primary market spreads |
title_fullStr |
Pricing of project finance bonds: a comparative analysis of primary market spreads |
title_full_unstemmed |
Pricing of project finance bonds: a comparative analysis of primary market spreads |
title_sort |
Pricing of project finance bonds: a comparative analysis of primary market spreads |
author |
Guedes, Sebastião S. |
author_facet |
Guedes, Sebastião S. Pinto, João M. |
author_role |
author |
author2 |
Pinto, João M. |
author2_role |
author |
dc.contributor.none.fl_str_mv |
Veritati - Repositório Institucional da Universidade Católica Portuguesa |
dc.contributor.author.fl_str_mv |
Guedes, Sebastião S. Pinto, João M. |
dc.subject.por.fl_str_mv |
Bond pricing Project finance Corporate bonds Cost of borrowing Debt choice |
topic |
Bond pricing Project finance Corporate bonds Cost of borrowing Debt choice |
description |
This paper provides a comparative analysis of project finance (PF) and traditional corporate finance (CF) bond spreads and pricing. Using a cross-section of 47,196 bonds issued worldwide in the 1993–2020 period, we show that PF and CF bonds are differently priced, PF bonds have higher spreads than comparable CF bonds, and although ratings are the most important pricing determinant for PF and CF bonds at issuance, investors rely on other contractual, macroeconomic, and firms' characteristics beyond these ratings. Our results do not support the hypothesis of PF transactions as mechanisms of reducing sponsoring firms' funding costs: the cost of borrowing affects financing choices and PF transactions' weighted average spread is higher than that of comparable CF bond deals. We also find that economies of scale, risk management, and information asymmetry arguments affect sponsoring firms' choice between PF and CF transactions. |
publishDate |
2023 |
dc.date.none.fl_str_mv |
2023-06-05T09:34:59Z 2023-10-01 2023-10-01T00:00:00Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10400.14/41309 |
url |
http://hdl.handle.net/10400.14/41309 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
0929-1199 10.1016/j.jcorpfin.2023.102429 85161342337 001016750000001 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
instname_str |
Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
instacron_str |
RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository.name.fl_str_mv |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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1799132066452865024 |