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Article: Withholding Bad News in the Face of Credit Default Swap Trading: Evidence from Stock Price Crash Risk
| Title | Withholding Bad News in the Face of Credit Default Swap Trading: Evidence from Stock Price Crash Risk |
|---|---|
| Authors | |
| Issue Date | 2023 |
| Citation | Journal of Financial and Quantitative Analysis, 2023, Forthcoming How to Cite? |
| Abstract | Credit default swaps (CDS) are a major financial innovation related to debt contracting. Because CDS markets facilitate bad news being incorporated into equity prices via cross-market information spillover, CDS availability may curb firms’ information hoarding. We find that CDS trading on a firm’s debt reduces the future stock price crash risk. This effect is stronger in active CDS markets, when the main lenders are CDS market dealers with securities trading subsidiaries, or when managers have more motivation to hoard information. Our findings suggest that debt market financial innovations curtail the negative equity market effects of firms withholding bad news. |
| Persistent Identifier | http://hdl.handle.net/10722/325937 |
| DC Field | Value | Language |
|---|---|---|
| dc.contributor.author | Liu, J | - |
| dc.contributor.author | Ng, TYJ | - |
| dc.contributor.author | Tang, Y | - |
| dc.contributor.author | Zhong, R | - |
| dc.date.accessioned | 2023-03-06T01:27:06Z | - |
| dc.date.available | 2023-03-06T01:27:06Z | - |
| dc.date.issued | 2023 | - |
| dc.identifier.citation | Journal of Financial and Quantitative Analysis, 2023, Forthcoming | - |
| dc.identifier.uri | http://hdl.handle.net/10722/325937 | - |
| dc.description.abstract | Credit default swaps (CDS) are a major financial innovation related to debt contracting. Because CDS markets facilitate bad news being incorporated into equity prices via cross-market information spillover, CDS availability may curb firms’ information hoarding. We find that CDS trading on a firm’s debt reduces the future stock price crash risk. This effect is stronger in active CDS markets, when the main lenders are CDS market dealers with securities trading subsidiaries, or when managers have more motivation to hoard information. Our findings suggest that debt market financial innovations curtail the negative equity market effects of firms withholding bad news. | - |
| dc.language | eng | - |
| dc.relation.ispartof | Journal of Financial and Quantitative Analysis | - |
| dc.title | Withholding Bad News in the Face of Credit Default Swap Trading: Evidence from Stock Price Crash Risk | - |
| dc.type | Article | - |
| dc.identifier.email | Ng, TYJ: jeffngty@hku.hk | - |
| dc.identifier.email | Tang, Y: yjtang@hku.hk | - |
| dc.identifier.authority | Ng, TYJ=rp02981 | - |
| dc.identifier.authority | Tang, Y=rp01096 | - |
| dc.identifier.doi | 10.1017/S002210902300008X | - |
| dc.identifier.hkuros | 344162 | - |
| dc.identifier.volume | Forthcoming | - |