Does the Tail Wag the Dog?: The Effect of Credit Default Swaps on Credit Risk

• 成果类型: Article
• 署名作者: Subrahmanyam, Marti G.; Tang, Dragon Yongjun; Wang, Sarah Qian
• 署名单位: New York University; University of Hong Kong; University of Warwick
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhu038
• 发表日期: 2014
• 页码: 2926
• 关键词: derivatives; debt; INVESTMENT; IMPACT; MODEL; firm

摘要

We use credit default swaps (CDS) trading data to demonstrate that the credit risk of reference firms, reflected in rating downgrades and bankruptcies, increases significantly upon the inception of CDS trading, a finding that is robust after controlling for the endogeneity of CDS trading. Additionally, distressed firms are more likely to file for bankruptcy if they are linked to CDS trading. Furthermore, firms with more no restructuring contracts than other types of CDS contracts (i.e., contracts that include restructuring) are more adversely affected by CDS trading, and the number of creditors increases after CDS trading begins, exacerbating creditor coordination failure in the resolution of financial distress.