Do banks still monitor when there is a market for credit protection?

• 成果类型: Article
• 署名作者: Shan, Chenyu; Tang, Dragon Yongjun; Winton, Andrew
• 署名单位: Shanghai University of Finance & Economics; University of Hong Kong; University of Minnesota System; University of Minnesota Twin Cities; Shanghai Jiao Tong University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2019.101241
• 发表日期: 2019
• 关键词: default swaps; loan sales; debt; covenants; RENEGOTIATION; INFORMATION; INVESTMENT; VIOLATIONS; governance; equity

摘要

The rise of credit default swaps (CDS) provides creditors with a market-based approach to obtaining protection, but it can also affect lenders' monitoring of the borrowers. We find that after CDS begin trading on a given firm, new loans to that firm are less likely to require collateral and have less strict financial covenants, even controlling for endogeneity. The effects are stronger when lenders have easier access to CDS, for safer firms, credit lines, and performance-based covenants. Our evidence is consistent with the theory that the introduction of CDS trading makes loan contracting more effective for better quality borrowers. (C) 2019 Elsevier B.V. All rights reserved.