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CiteWeb id: 20160000116

CiteWeb score: 395

This study documents, for the first time, the severity of bond defaults stratified by Standard Industrial Classification sector and by debt seniority. The highest average recoveries came from public utilities (70 percent) and chemical, petroleum, and related products (63 percent). The differences between those sectors and all the rest are statistically significant, even when adjustedfor seniority. The original rating of a bond issue as investment grade or below investment grade has virtually no effect on recoveries once seniority is accountedfor. In addition, neither the size of the issue nor the time to defaultfrom its original date of issuance has any association with the recovery rate. These results should provide important information for investors as well as analysts.

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