RT Journal Article SR Electronic T1 Default Risk Characteristics of Construction Surety Bonds JF The Journal of Fixed Income FD Institutional Investor Journals SP 77 OP 87 DO 10.3905/jfi.2019.29.1.077 VO 29 IS 1 A1 Hyeongjun Kim A1 Hoon Cho A1 Doojin Ryu YR 2019 UL https://pm-research.com/content/29/1/77.abstract AB A construction surety bond helps a development project to proceed smoothly. This financial product has supported the rapid economic growth of several emerging markets, including the Republic of Korea. In this study, by using a unique and high-quality dataset, the authors analyze construction surety bonds to estimate their default probabilities. The results have several empirical implications. First, firm characteristics, such as firm size and leverage ratio, influence the surety bond default risk; the safety and liquidity measure are especially robust indicators. The result also confirms that account receivables can increase the default risk. Second, endogenous variables of the surety bond are also robust indicators of default. Because a construction surety bond itself has additional information about a company starting a new construction project, those variables can contribute to indicating default risk. Finally, default forecasting based on this model has much greater forecasting power than models based on the credit rating.TOPICS: Project finance, statistical methods, credit risk management, emerging markets