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Bartram, Söhnke M., Conrad, Jennifer, Lee, Jongsub and Subrahmanyam, Marti G. (2022) Credit default swaps around the world. Review of Financial Studies, 35 (5). pp. 2464-2524. doi:10.1093/rfs/hhab092
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Official URL: https://doi.org/10.1093/rfs/hhab092
Abstract
We analyze the impact of the introduction of credit default swaps (CDSs) on real decision-making within the firm. Our structural model predicts that CDS introduction increases debt capacity more when uncertainty about the credit events that trigger CDS payment is lower. Using a sample of more than 56,000 firms across 51 countries, we find that CDSs increase leverage more in legal and market environments where uncertainty about CDS obligations is reduced and when property rights are weaker. Our results highlight the importance of legal uncertainty in the interpretation of the underlying trigger events of global credit derivatives.
| Item Type: | Journal Article | ||||||||
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| Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
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| Divisions: | Faculty of Social Sciences > Warwick Business School | ||||||||
| Library of Congress Subject Headings (LCSH): | Derivative securities, Swaps (Finance), Right of property, Credit derivatives, Uncertainty | ||||||||
| Journal or Publication Title: | Review of Financial Studies | ||||||||
| Publisher: | Oxford University Press | ||||||||
| ISSN: | 0893-9454 | ||||||||
| Official Date: | May 2022 | ||||||||
| Dates: |
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| Volume: | 35 | ||||||||
| Number: | 5 | ||||||||
| Page Range: | pp. 2464-2524 | ||||||||
| DOI: | 10.1093/rfs/hhab092 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Reuse Statement (publisher, data, author rights): | This is a pre-copyedited, author-produced version of an article accepted for publication in Review of Financial Studies following peer review. The version of record [insert complete citation information here] is available online at: xxxxxxx [insert URL and DOI of the article on the OUP website]. | ||||||||
| Access rights to Published version: | Open Access | ||||||||
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