Credit Shock Propagation Along Supply Chains: Evidence from the CDS Market

• 成果类型: Article
• 署名作者: Agca, Senay; Babich, Volodymyr; Birge, John R.; Wu, Jing
• 署名单位: George Washington University; George Washington University; University of Chicago; Chinese University of Hong Kong
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2021.4174
• 发表日期: 2022
• 页码: 6506-6538
• 关键词: Supply chains; Credit risk; CDS; propagation; supply networks

摘要

Using a panel of credit default swap (CDS) spreads and supply chain links, we observe that both favorable and unfavorable credit shocks propagate through supply chains in the CDS market. Particularly, the three-day cumulative abnormal CDS spread change (CASC) is 63 basis points for firms whose customers experienced a CDS up-jump event (an adverse credit shock). The value is 74 basis points if their suppliers experienced a CDS up-jump event. The corresponding three-day CASC values are -36 and -38 basis points, respectively, for firms whose customers and suppliers, respectively, experienced an extreme CDS down-jump event (a favorable credit shock). These effects are approximately twice as large for adverse credit shocks originating from natural disasters. Credit shock propagation is absent in inactive supply chains and is amplified if supply chain partners are followed by the same analysts. Industry competition and financial linkages between supply chain partners, such as trade credit and large sales exposure, amplify the shock propagation along supply chains. Strong shock propagation persists through second and third supply chain tiers for adverse shocks but attenuates for favorable shocks.