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Article: Does the Tail Wag the Dog?: The Effect of Credit Default Swaps on Credit Risk

TitleDoes the Tail Wag the Dog?: The Effect of Credit Default Swaps on Credit Risk
Authors
KeywordsCredit Default Swaps
Credit Risk
Bankruptcy
Empty Creditor
Issue Date2014
PublisherOxford University Press. The Journal's web site is located at http://rfs.oxfordjournals.org/
Citation
The Review of Financial Studies, 2014, v. 27 n. 10, p. 2927-2960 How to Cite?
AbstractWe use credit default swaps (CDS) trading data to demonstrate that the credit risk of reference firms, reflected in rating downgrades and bankruptcies, increases significantly upon the inception of CDS trading, a finding that is robust after controlling for the endogeneity of CDS trading. Additionally, distressed firms are more likely to file for bankruptcy if they are linked to CDS trading. Furthermore, firms with more “no restructuring” contracts than other types of CDS contracts (i.e., contracts that include restructuring) are more adversely affected by CDS trading, and the number of creditors increases after CDS trading begins, exacerbating creditor coordination failure in the resolution of financial distress.
Persistent Identifierhttp://hdl.handle.net/10722/203527
ISSN
2015 Impact Factor: 3.119
2015 SCImago Journal Rankings: 9.925
SSRN

 

DC FieldValueLanguage
dc.contributor.authorSubrahmanyam, MGen_US
dc.contributor.authorTang, DYen_US
dc.contributor.authorWang, SQen_US
dc.date.accessioned2014-09-19T15:25:45Z-
dc.date.available2014-09-19T15:25:45Z-
dc.date.issued2014-
dc.identifier.citationThe Review of Financial Studies, 2014, v. 27 n. 10, p. 2927-2960en_US
dc.identifier.issn0893-9454-
dc.identifier.urihttp://hdl.handle.net/10722/203527-
dc.description.abstractWe use credit default swaps (CDS) trading data to demonstrate that the credit risk of reference firms, reflected in rating downgrades and bankruptcies, increases significantly upon the inception of CDS trading, a finding that is robust after controlling for the endogeneity of CDS trading. Additionally, distressed firms are more likely to file for bankruptcy if they are linked to CDS trading. Furthermore, firms with more “no restructuring” contracts than other types of CDS contracts (i.e., contracts that include restructuring) are more adversely affected by CDS trading, and the number of creditors increases after CDS trading begins, exacerbating creditor coordination failure in the resolution of financial distress.-
dc.languageengen_US
dc.publisherOxford University Press. The Journal's web site is located at http://rfs.oxfordjournals.org/-
dc.relation.ispartofThe Review of Financial Studiesen_US
dc.rightsThis is a pre-copy-editing, author-produced PDF of an article accepted for publication in [The Review of Financial Studies] following peer review. The definitive publisher-authenticated version [The Review of Financial Studies, 2014, v. 27 n. 10, p. 2927-2960] is available online at: [http://dx.doi.org/10.1093/rfs/hhu038].-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectCredit Default Swaps-
dc.subjectCredit Risk-
dc.subjectBankruptcy-
dc.subjectEmpty Creditor-
dc.titleDoes the Tail Wag the Dog?: The Effect of Credit Default Swaps on Credit Risken_US
dc.typeArticleen_US
dc.identifier.emailTang, DY: yjtang@hku.hken_US
dc.identifier.authorityTang, Y=rp01096en_US
dc.description.naturepostprint-
dc.identifier.doi10.1093/rfs/hhu038-
dc.identifier.hkuros235612en_US
dc.identifier.volume27-
dc.identifier.issue10-
dc.identifier.spage2927-
dc.identifier.epage2960-
dc.publisher.placeUnited Kingdom-
dc.identifier.ssrn2192351-

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