Credit Derivatives and Analyst Behavior

• 成果类型: Article
• 署名作者: Batta, George Eli; Qiu, Jiaping; Yu, Fan
• 署名单位: Claremont Colleges; Claremont Graduate University; Claremont McKenna College; McMaster University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-51381
• 发表日期: 2016
• 页码: 1315-1343
• 关键词: private information; cross-section; stock returns; earnings; default; liquidity; MARKET; forecasts; spreads; volume

摘要

This paper presents a comprehensive analysis of the role of credit default swaps (CDS) in information production surrounding earnings announcements. First, we demonstrate that the strength of CDS price discovery prior to earnings announcements is related to the presence of private information and the illiquidity of the underlying corporate bonds, consistent with the CDS market being a preferred venue for informed trading. Next, we ask how the information revealed through CDS trading influences the output of equity and credit rating analysts. We find that post-CDS trading, the dispersion and error of earnings per share forecasts are generally reduced, and downgrades by both types of analysts become more frequent and more timely before large negative earnings surprises, suggesting that the CDS market conveys information valuable to financial analysts.