Corporate Payout Policy and Credit Risk: Evidence from Credit Default Swap Markets

• 成果类型: Article
• 署名作者: Sun, Chengzhu; Wang, Shujing; Zhang, Chu
• 署名单位: Hong Kong Polytechnic University; Tongji University; Hong Kong University of Science & Technology
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2020.3753
• 发表日期: 2021
• 页码: 5755-5775
• 关键词: dividend announcements; Credit Default Swaps; industrial firms; financial firms; Troubled Asset Relief Program

摘要

We examine whether and how payout policy affects credit risk using evidence from the credit default swap (CDS) market. CDS spreads increase substantially in response to announcements of dividend cuts, especially during recessions and among firms ex-periencing financial distress. CDS spreads also react more strongly to permanent and less anticipated dividend cuts. The size of the CDS reaction is more pronounced for financial firms, which are inherently more opaque. In contrast, CDS spreads react weakly to dividend raises and share repurchases. The results show that the information effect of dividend changes dominates the wealth-transfer effect.