Figure 11
Estimates Without Credit Rating Effects
NLLS Estimates of the Bankruptcy Cost Parameter μ
Note. The shaded region represents +/- two standard error bands computed using a
heteroscedasticity-consistent asymptotic covariance matrix. The model includes fixed industry
(3-digit NAICS) effects.
1 See Figure 6.
Recovery Rates on Defaulted Bonds
Percent
1 Average model-implied recovery rate weighted by the book value of bonds outstanding.
2 Average recovery rate at default weighted by the book value of the defaulted bond issue
(four-quarter moving average).
3 See Figure 7.
31
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