CDS Trading Initiation, Information Asymmetry, and Dividend Payout

• 成果类型: Article
• 署名作者: Landsman, Wayne R.; Li, Chao Kevin; Zhao, Jianxin Donny
• 署名单位: University of North Carolina; University of North Carolina Chapel Hill; University of New South Wales Sydney; Emory University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.4337
• 发表日期: 2023
• 页码: 684-701
• 关键词: CDS trading; dividend payout; AGENCY COSTS

摘要

This study uses an information-asymmetry framework to examine the effect of initiation of credit default swaps (CDS) trading on firm dividend payout policy. We find evidence that CDS initiation is associated with increasing dividends, which is consistent with firms distributing excess free cash flow to mitigate exacerbated manager-equityholder agency conflicts resulting from reduced monitoring by banks following CDS initiation. Additional findings support this explanation by showing that the dividend increases are concentrated among borrowing firms with higher agency cost before CDS initiation, among firms whose lead arranger banks have a relatively less strong reputation in the loan-syndication market, and among firms whose loans are subject to less intense monitoring features???that is, less restrictive loan covenants???following CDS initiation. Additional analyses also suggest that inferences are robust to controlling for the potential effects of CDS initiation on capital structure.