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Article: Do Banks Still Monitor When There is a Market for Credit Protection?

TitleDo Banks Still Monitor When There is a Market for Credit Protection?
Authors
KeywordsCredit default swaps
CDS
Collateral
Covenants
Credit protection
Issue Date2019
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jae
Citation
Journal of Accounting and Economics, 2019, 68 n. 2-3, article no. 101241 How to Cite?
AbstractThe 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.
Persistent Identifierhttp://hdl.handle.net/10722/279024
ISSN
2023 Impact Factor: 5.4
2023 SCImago Journal Rankings: 8.337
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorShan, C-
dc.contributor.authorTang, DY-
dc.contributor.authorWinton, A-
dc.date.accessioned2019-10-21T02:18:13Z-
dc.date.available2019-10-21T02:18:13Z-
dc.date.issued2019-
dc.identifier.citationJournal of Accounting and Economics, 2019, 68 n. 2-3, article no. 101241-
dc.identifier.issn0165-4101-
dc.identifier.urihttp://hdl.handle.net/10722/279024-
dc.description.abstractThe 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.-
dc.languageeng-
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jae-
dc.relation.ispartofJournal of Accounting and Economics-
dc.subjectCredit default swaps-
dc.subjectCDS-
dc.subjectCollateral-
dc.subjectCovenants-
dc.subjectCredit protection-
dc.titleDo Banks Still Monitor When There is a Market for Credit Protection?-
dc.typeArticle-
dc.identifier.emailTang, DY: yjtang@hku.hk-
dc.identifier.authorityTang, DY=rp01096-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.jacceco.2019.101241-
dc.identifier.scopuseid_2-s2.0-85071144180-
dc.identifier.hkuros308110-
dc.identifier.volume68-
dc.identifier.issue2-3-
dc.identifier.spagearticle no. 101241-
dc.identifier.epagearticle no. 101241-
dc.identifier.isiWOS:000505643100006-
dc.publisher.placeNetherlands-
dc.identifier.issnl0165-4101-

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