Credit Default Swaps and Firm Risk
Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review
Author(s)
Related Research Unit(s)
Detail(s)
| Original language | English |
|---|---|
| Pages (from-to) | 1668-1692 |
| Number of pages | 25 |
| Journal / Publication | Journal of Futures Markets |
| Volume | 43 |
| Issue number | 11 |
| Online published | 17 Jul 2023 |
| Publication status | Published - Nov 2023 |
Link(s)
| DOI | DOI |
|---|---|
| Attachment(s) | Documents
Publisher's Copyright Statement
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| Link to Scopus | https://www.scopus.com/record/display.uri?eid=2-s2.0-85165250316&origin=recordpage |
| Permanent Link | https://scholars.cityu.edu.hk/en/publications/publication(26d8f00d-d295-495d-9a1c-764237593e83).html |
Abstract
This study investigates how initiating a credit default swap (CDS) affects firm risk. Using the firm value volatility as a measure of firm risk, we document that firm risk decreases following the commencement of CDS trading. Further analysis indicates that the empty creditor channel, which arises when a debt holder with CDS protection has no interest in preserving the company it provides funds, is the primary way of influence. Our findings reveal a significant impact of financial innovation on a firm's behavior. We also document that market frictions affect the degree of such effect. © 2023 The Authors. The Journal of Futures Markets published by Wiley Periodicals LLC.
Research Area(s)
- credit default swap, credit quality, empty creditor, financial constraint, firm value volatility
Citation Format(s)
Credit Default Swaps and Firm Risk. / Lin, Hai; Nguyen, Binh Hoang; Wang, Junbo et al.
In: Journal of Futures Markets, Vol. 43, No. 11, 11.2023, p. 1668-1692.
In: Journal of Futures Markets, Vol. 43, No. 11, 11.2023, p. 1668-1692.
Research output: Journal Publications and Reviews (RGC: 21, 22, 62) › 21_Publication in refereed journal › peer-review
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