Abstract
Creditors are less stringent on their borrowers’ near-term profitability when they can buy credit protection from the financial market, freeing borrowers for more aggressive strategies in the product market. We find that, after the inception of credit default swaps (CDS) trading, the reference firms gain product market share from their non-CDS industry rivals. This CDS effect on industry structure is more pronounced for more opaque and financially constrained sectors. CDS firms gain market share by cutting product prices and increasing R&D. This is the first study showing that derivatives trading in the financial market can affect the product market.
| Original language | English |
|---|---|
| Publication status | Published - Oct 2018 |
| Event | 2018 Financial Management Association Annual Meeting - Hilton San Diego Bayfront, San Diego, United States Duration: 10 Oct 2018 → 13 Oct 2018 https://www.fma.org/san-diego |
Conference
| Conference | 2018 Financial Management Association Annual Meeting |
|---|---|
| Place | United States |
| City | San Diego |
| Period | 10/10/18 → 13/10/18 |
| Internet address |
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