Kuo-Jung Lee

Bio: Kuo-Jung Lee is an academic researcher. The author has contributed to research in topics: Monetary policy & Credit spread (options). The author has an hindex of 1, co-authored 1 publications receiving 1 citations.

Investigating the Determinants of Credit Spread Using a Markov Regime-Switching Model: Evidence from Banks in Taiwan

Abstract: In this study, we investigate the determinants of credit spread using a Markov regime-switching model. We consider corporate governance variables and credit risk to analyze the determinants of credit spread. The corporate governance mechanism is an indicator of company sustainability, and credit spread is the main factor in profits obtained by banks. However, the relationship between credit spread and corporate governance is seldom discussed. We focus on loans from banks in Taiwan between 2000 and 2019 and apply a Markov regime-switching model, which is superior to other models in capturing different effects in various regimes. We specify two regime types: corporate governance and credit risk regimes. Furthermore, we consider four aspects of corporate governance: firm ownership structure, board structure, deviation, and information environment. In this study, the determinants of credit spread are investigated more thoroughly than in previous studies. Moreover, in this study, we examine the effects of monetary policy and economic status on credit spread using a Markov regime-switching model; such models are not employed to their full extent in related studies of credit spread. Empirical results indicate that credit spread has different effects in various regimes. Thus, understanding the determinants of credit spread in different regimes is crucial for financial analysts, investors, economic policymakers, and banks. Consequently, we expect that this study can improve the management and measurement of credit risk and be of value to financial institutions.

What is Corporate Governance

Abstract: The word governance comes from a Latin word – gubernare – which means to steer. Cicero has written ‘he that governs sits quietly at the stern and scarce is seen to stir’. Thus my colleague, Dr Collette Kirwan, has conceptualised the board as being the navigator of the company.