ABSTRACT
We analyze the determinants of bank bond spread. The bank sector is specific due to strict regulatory control increasing in the 21st century and issuance of subordinated debt. The banking sector is actively transforming, under processes of restructuring and M&A, which is changing the financial positions of bondholders. These features are motivating researchers to look for specific determinants of bond yield.
Most papers focus on the developed markets of the US and Eurozone. We analyzed and structured the research papers taking into account factors in developed markets. We also empirically discover the determinants of yield to maturity for bank bonds of Latin America. By employing panel regressions, with fixed and random effects and GMM models, we test the hypotheses about the effect of bond issue characteristics, bank financial and non-fundamental indicators on the bond spread. We find that during the period from 2008 to 2018, quality of corporate governance, ratio of capital expenditure to total assets, profitability and debt load indicators, and the size of bank assets are significant determinants of bank bond spreads.
