Creditor-control rights and the nonsynchronicity of global CDS markets
Hasan, I., Marra, M.
It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing. To link to this item DOI: 10.1093/rcfs/cfad010 Abstract/SummaryWe analyze how creditor rights affect the nonsynchronicity of global corporate credit default swap spreads (CDS-NS). CDS-NS is negatively related to the country-level creditor-control rights, especially to the “Restrictions on reorganization” component, where creditor-shareholder conflicts are high. The effect is concentrated in firms with high investment intensity, asset growth, information opacity, and risk. Pro-creditor bankruptcy reforms led to a decline in CDS-NS, indicating lower firm-specific idiosyncratic information being priced in credit markets. A strategic-disclosure incentive among debtors avoiding creditor intervention seems more dominant than the disciplining effect, suggesting how strengthening creditor rights affects power rebalancing between creditors and shareholders.
Acemoglu, D., and Johnson, S., (2005), Unbundling Institutions, Journal of Political Economy, 113, 949-995.
Acharya, V.V., Amihud, Y. and Litov, L., (2011), Creditor Rights and Corporate Risk-Taking, Journal of Financial Economics, 102, 150-166.
Aldasoro, I. and Ehlers, T., (2018). The Credit Default Swap Market: What a Difference a Decade Makes, BIS Quarterly Review, June 2018, Bank for International Settlements, Basel, Switzerland.
Altman, E. I., and Kishore, V. M., (1996), Almost Everything You Wanted to Know about Recoveries on Defaulted Bonds, Financial Analysts Journal, 52, 57-64
Anderson, M., (2017), What Drives the Commonality between Credit Default Swap Spread Changes? Journal of Financial and Quantitative Analysis, 52, 243-275.
Anderson, R., Sattar M., and Reeb, D., (2004), Board Characteristics, Accounting Report Integrity, and the Cost of Debt, Journal of Accounting and Economics, 37, 315–342.
Augustin, P. and Izhakian Y., (2019), Ambiguity, Volatility, and Credit Risk, The Review of Financial Studies, https://doi.org/10.1093/rfs/hhz082
Augustin, P., Jiao F., Sarkissian, S. and Schill, M. J., (2020), Cross-Listings and the Dynamics between Credit and Equity Returns, The Review of Financial Studies, 33, 112-154.
Augustin, P. and Tédongap R., (2016), Real Economic Shocks and Sovereign Credit Risk, Journal of Financial and Quantitative Analysis, 51, 541-587.
Badoer, D and Demiroglu, C., (2019), The Relevance of Credit Ratings in Transparent Bond Markets, Review of Financial Studies, 32, 42-74.
Bae, K.H., and Goyal, V., (2009), Creditor Rights, Enforcement, and Bank Loans, Journal of Finance, 64, 823–860.
Bartram, S.M., Conrad, J., Lee, J. and Subrahmanyam, M.G., (2021), Credit Default Swaps around the World, The Review of Financial Studies, in-press.
Benzoni, L. Collin-Dufresne, P., Goldstein, R.S., Helwege J., (2015), Modeling Credit Contagion via the Updating of Fragile Beliefs, The Review of Financial Studies, 28, 1960–2008.
Berndt, A., (2015), A Credit Spread Puzzle for Reduced-Form Models, Review of Asset Pricing Studies, 5, 48-91.
Berndt, A., Douglas, R., Duffie, D., and Ferguson, M. , (2018), Corporate Credit Risk Premia, Review of Finance, 22, 419-454.
Berndt, A. and Obreja, I., (2010), Decomposing European CDS Returns, Review of Finance, 14, 189-233.
Blanco, R., Brennan, S. and Marsh, I. W., (2005), An Empirical Analysis of the Dynamic Relation between Investment-Grade Bonds and Credit Default Swaps. Journal of Finance, 60, 2255-2281.
Bongaerts, D., De Jong, F., and Driessen, J., (2011), Derivative Pricing with Liquidity Risk: Theory and Evidence from the Credit Default Swap Market, Journal of Finance, 66, 203-240.
Brockman, P., and Unlu, E., (2009), Dividend Policy, Creditor Rights, and the Agency Costs of Debt, Journal of Financial Economics, 92, 276-299.
Bushman, R.M., Piotroski, J.D., Smith, A.J., (2004), What Determines Corporate Transparency? Journal of Accounting Research, 42, 207–252.
Campello, M., Chen, L. and Zhang, L., (2008), Expected Returns, Yield Spreads, and Asset Pricing Tests, Review of Asset Pricing Studies, 21, 1297-1338.
Chava, S. and Roberts, M. R., (2008), How Does Financing Impact Investment? The Role of Debt Covenants, Journal of Finance, 63, 2085-2121.
Closset, F. and Urban, D. (2019). The Balance of Power between Creditors and the Firm: Evidence, Journal of Corporate Finance, 58, pp. 454–477.
Cortes, F., Thakor, A., and Vega, D., (2017), Credit Rating Changes, Information Acquisition and Stock Price Informativeness, Working paper.
De Jong, F., and Driessen, J., (2012), Liquidity Risk Premia in Corporate Bond Markets, Quarterly Journal of Finance, 2, 1-34.
Denis, D., and Wang, J., (2014), Debt Covenant Renegotiations and Creditor Control Rights, Journal of Financial Economics, 113, 348–367.
Djankov, S., Hart, O., McLiesh, C., and Shleifer, A., (2008), Debt Enforcement Around the World, Journal of Political Economy, 116(6), 1105-1150.
Djankov, S., McLiesh, C. and Shleifer, A., (2007), Private Credit in 129 Countries, Journal of Financial Economics, 12, 77-99.
Duan, J.C., Sun, J., and Wang, T., (2012), Multiperiod Corporate Default Prediction - A Forward Intensity Approach, Journal of Econometrics, 170, 191–209.
Duffie, D., Saita, L. and Wang, K. (2007), Multiperiod Corporate Default Prediction with Stochastic Covariates, Journal of Financial Economics, 83, 635–665.
Durnev, A., Morck, R., Yeung, B. and Zarowin, P., (2003), Does Greater Firm-Specific Returns Variation Mean More or Less Informed Stock Pricing? Journal of Accounting Research, 41, 797-836.
Ericsson, J., Jacobs, K., and Oviedo, R., (2009), The Determinants of Credit Default Swap Premia, Journal of Financial and Quantitative Analysis, 44, 109–132.
Falato, A., and Liang, N., (2016), Do Creditor Rights Increase Employment Risk? Evidence from Loan Covenants, Journal of Finance, 71, 2545–2590.
Favara, G., Morellec, E., Schroth, E., and Valta, P., (2017), Debt Enforcement, Investment, and Risk Taking across Countries, Journal of Financial Economics, 123, 22-41.
Feldhütter, P., Hotchkiss, E., and Karakas, O., (2016), The Value of Creditor Control in Corporate Bonds, Journal of Financial Economics, 121, 1-27.
Ferreira, D., Ferreira, M., and Mariano, B., (2018), Creditor Control Rights and Board Independence, Journal of Finance, 73, 2385-2423.
Ferreira M., and Laux, P., (2007), Corporate Governance, Idiosyncratic Risk, and Information Flow, Journal of Finance, 62, 951–89.
Gilson, S., (1990), Bankruptcy, Boards, Banks, and Blockholders: Evidence on Changes in Corporate Ownership and Control When Firms Default, Journal of Financial Economics, 27, 355–387.
Gormley, T.A. and Matsa, D.A., (2016), Playing It Safe? Managerial Preferences, Risk, and Agency Conflicts, Journal of Finance Economics, 122, 431-455.
Gul F., Kim, J.-B., and Qiu, A., (2010), Ownership Concentration, Foreign Shareholding, Audit Quality, and Stock Price Synchronicity: Evidence from China, Journal of Financial Economics, 95, 425–42.
Haddad, V., Moreira, A., and Muir, T., (2021) When Selling Becomes Viral: Disruptions in Debt Markets in the COVID-19 Crisis and the Fed’s Response, The Review of Financial Studies, Forthcoming.
Hamdani, A., Mugerman, Y., Rooz, R., Steinberg, N., and Yafeh, Y., (2022). Creditor Rights, Implicit Covenants, and the Quality of Accounting Information, European Corporate Governance Institute – Finance Working Paper No. 811/2022; Available at SSRN: https://ssrn.com/abstract=4002641
Haggard S., Martin X., and Pereira, R., (2008), Does Voluntary Disclosure Improve Stock Price Informativeness?, Financial Management, 37, 747–68.
Hart, O. (1995). Firms, Contracts, and Financial Structure. Clarendon Press.
Hart, O., and Moore, J. (1998). Default and Renegotiation: a Dynamic Model of Debt, Quarterly Journal of Economics, 113, 1–42.
Hasan, I., John, K., and Kadiyala, P., (2018), Debt Structure when Bankruptcy Law offers Incentives to Restructure, New York University Working paper.
Hasan, I., Marra, M., To, T. Y., Wu, E., and Zhang, G., (2023), COVID-19 Pandemic and Global Corporate CDS Spreads, Journal of Banking and Finance, 147, 106618.
Haw, I.M., B. Hu, J.J. Lee and Wu, W., (2012), Investor Protection and Price Informativeness about Future Earnings: International Evidence, Review of Accounting Studies, 17, 389-419.
Healy, P.M., and Palepu K., (2001), Information Asymmetry, Corporate Disclosure, and the Capital Market: A Review of the Empirical Disclosure Literature, Journal of Accounting and Economics, 31, 405-440.
Hoffmann, P., Kremer, M. and S. Zaharia (2020), Financial integration in Europe through the lens of composite indicators, Economic Letters, 194, 109344.
Hofstede, G., (2011), Dimensionalizing Cultures: The Hofstede Model in Context. Online Readings in Psychology and Culture, 2, 8.
Houston, J. F., Lin, C., Lin, P., and Ma, Y., (2010), Creditor Rights, Information Sharing and Bank Risk Taking, Journal of Financial Economics, 96, 485-512.
Hutton, A. P., Marcus, A. J. , and Tehranian, H., (2009), Opaque Financial Reports, R2, and Crash Risk, Journal of Financial Economics, 94, 67-86.
Jankowitsch, R., Nagler, F., and Subrahmanyam, M., (2014), The Determinants of Recovery Rates in the U.S. Corporate Bond Market, Journal of Financial Economics, 114, 155-177.
Jensen, M., and Meckling, W., (1976), Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3, 305–360.
Jin, L., and Myers, S., (2006), R-Square around the World, Journal of Financial Economics, 79, 257-292.
Jorion, P. and Zhang, G., (2007), Good and Bad Credit Contagion: Evidence from Credit Default Swaps, Journal of Financial Economics, 84, 860-883.
Jorion, P. and Zhang, G., (2009), Credit Contagion from Counterparty Risk, Journal of Finance, 64, 2053-2087.
Kaplan, S., and Minton, B., (1994), Appointments of Outsiders to Japanese Boards: Determinants and Implications for Managers, Journal of Financial Economics, 36, 225–258.
Karamanou, I., and Vafeas, N., (2005), The Association between Corporate Boards, Audit Committees, and Management Earnings Forecasts: An Empirical Analysis, Journal of Accounting Research, 43, 453-86.
Kim, J. B., Shroff, P., Vyas, D., and Wittenberg-Moerman, R., (2017), Credit Default Swaps and Managers’ Voluntary Disclosure, Journal of Accounting Research, 56, 953-988.
Klock, M.S., Mansi, S. A., and Maxwell, W. F., (2005), Does Corporate Governance Matter to Bondholders? Journal of Financial and Quantitative Analysis, 40, 693-719.
La Porta, R., Lopez de-Silanes, F., Shleifer A., Vishny, R.W., (1998), Law and Finance. Journal of Political Economy, 106, 1112-1155.
La Porta, R., Lopez de-Silanes, F., Shleifer A., Vishny, R.W., (1999), The Quality of Government. Journal of Law, Economics and Organization, 15, 222-279.
La Porta, R., Lopez de-Silanes, F., Shleifer A., Vishny, R.W., (2000), Investor Protection and Corporate Governance. Journal of Financial Economics, 58, 3-27.
La Porta, R., Lopez-de Silanes, F., Shleifer, A., and Vishny, R., (2008), The Economic Consequences of Legal Origins, Journal of Economic Literature, 46, 285-332.
Lee, J., Naranjo, A., and Sirmans, S., (2016), Exodus from Sovereign Risk: Global Asset and Information Networks in the Pricing of Corporate Credit Risk, Journal of Finance, 71, 1813-1856.
Lee, J., Naranjo, A., and Sirmans, S., (2021), CDS Momentum: Slow-Moving Credit Ratings and Cross-Market Spillovers, The Review of Asset Pricing Studies, 11(2), 352-401.
Lee, J., Naranjo, A. and Velioglu, G., (2018). When Do CDS Spreads Lead? Rating Events, Private Entities, and Firm-Specific Information Flows, Journal of Financial Economics, 130(3), 556-578.
Levine, R., Loayza, N., and Beck, T., (2000), Financial Intermediation and Growth: Causality and Causes, Journal of Monetary Economics, 46, 31-77.
Longstaff, F. A., Pan, J., Pedersen, L. H., and Singleton, K. J., (2011), How Sovereign Is Sovereign Credit Risk? American Economic Journal: Macroeconomics, 3, 75-103.
Mann, W. (2018), Creditor Rights and Innovation: Evidence from Patent Collateral, Journal of Financial Economics, 130, 25-47.
Marra, M., Yu, F., and Zhu, L., (2019), The Impact of Trade Reporting and Central Clearing on CDS Price Informativeness, Journal of Financial Stability, 43, 130-145.
Martin, X., and Roychowdhury, S., (2015), Do Financial Market Developments influence Accounting Practices? Credit Default Swaps and Borrowers’ Reporting Conservatism, Journal of Accounting and Economics, 59, 80-104.
Merton, R. (1974), On the Pricing of Corporate Debt: The Risk Structure of Interest Rates, Journal of Finance, 29, 449-470.
Miller, G. S. (2002), Earnings Performance and Discretionary Disclosure, Journal of Accounting Research, 40, 173–204.
Mora, N. (2012), What Determines Creditor Recovery Rates? FED Reserve of Kansas City, Economic Review, Second Quarter 2012.
Morck, R., Yeung, B., and Yu, W., (2000), The Information Content of Stock Markets: why do Emerging Markets have Synchronous Stock Price Movements? Journal of Financial Economics, 58, 215-260.
Morck, R., Yeung, B., and Yu, W. (2013), R 2 and the Economy, Annual Review of Financial Economics, 5, 143-166.
Nini, G., Smith, D. and A. Sufi (2009), Creditor Control Rights and Firm Investment Policy, Journal of Financial Economics 92, 400–420.
Nini, G., Smith, D. C., and Sufi, A., (2012), Creditor Control Rights, Corporate Governance, and Firm Value, Review of Financial Studies, 25, 1713–1761.
North, D.C., (1981), Structure and Change in Economic History, New York: W. W. Norton & Co.
Oehmke, M., and Zawadowski, A., (2017), The Anatomy of the CDS Market, The Review of Financial Studies, 30, 80–119.
Piotroski, J., and Roulstone, D., (2004), The Influence of Analysts, Institutional Investors and Insiders on the Incorporation of Market, Industry and Firm-Specific Information into Stock Prices, The Accounting Review, 79, 1119–1151.
Pukthuanthong, K., and Roll, R., (2009), Global Market Integration: An Alternative Measure and its Application, Journal of Financial Economics, 94, 214-232.
Rajan, R., and Zingales L., (1995). What Do We Know About Capital Structure? Some Evidence from International Data, Journal of Finance, 50, pp. 1421–1460.
RMI Staff (2015), NUS-RMI Credit Research Initiative Technical Report Version: 2015 Update 1, Global Credit Review, 5, 113-203.
Roberts, M. (2015), The Role of Dynamic Renegotiation and Asymmetric Information in
Financial Contracting, Journal of Financial Economics, 116, 61–81.
Roberts, M., and Sufi, A., (2009), Control Rights and Capital Structure: An Empirical Investigation, Journal of Finance, 64, 1657–1695.
Rodano, G., Velarde, G. S., and Tarantino, E., (2016). Bankruptcy Law and Bank Financing, Journal of Financial Economics, 120, pp. 363–382.
Roll, R., (1988), R2. Journal of Finance, 43, 541-566.
Schwaab, B., Koopman, S. J., and Lucas, A., (2017), Global Credit Risk: World, Country and Industry Factors, Journal of Applied Econometrics, 32, 296-317.
Schoenherr, D., and Starmans, J., (2020), When Should Bankruptcy Law be Creditor- or Debtor-Friendly? Theory and Evidence, Princeton University and Stockholm School of Economics Working Paper.
Shan, C., Tang, D. Y., and Winton, A., (2019), Do Banks still Monitor When There Is a Market for Credit Protection? Journal of Accounting and Economics, 68, 2-3.
Spatt, C. S. (2006). SEC Speech - Financial Regulation: Economic Margins and "Unintended Consequences"; Washington, D.C.: Mar. 17, 2006.
Spatt, C. S. (2020), A Tale of Two Crises: The 2008 Mortgage Meltdown and the 2020 COVID-19 Crisis, The Review of Asset Pricing Studies, 10(4), 759–790.
Spence, M. (1973), Job Marketing Signalling. The Quarterly Journal of Economics, 87, 355-374.
Trueman, B. (1986) Why Do Managers Voluntarily Release Earnings Forecasts? Journal of Accounting and Economics, 8, 53–72.
Vashishtha, R. (2014), The Role of Bank Monitoring in Borrowers’ Discretionary Disclosure: Evidence from Covenant Violations, Journal of Accounting and Economics, 57, 176-195.
Verrecchia, R. E. (1983), Discretionary Disclosure, Journal of Accounting and Economics, 5, 179–194.
Vig, V. (2013), Access to Collateral and Corporate Debt Structure: Evidence from a Natural Experiment, Journal of Finance, 68, 881-927.
Von Lilienfeld-Toal, U., Mookherjee, D., and Visaria, S., (2012), The Distributive Impact of Reforms in Credit Enforcement: Evidence from Indian Debt Recovery Tribunals, Econometrica, 80, 497-558.
Wurgler, J. (2000), Financial Markets and the Allocation of Capital, Journal of Financial Economics, 58, 187–214. University Staff: Request a correction | Centaur Editors: Update this record |
University of Reading
CentAUR: Central Archive at the University of Reading
Accessibility navigation
Creditor-control rights and the nonsynchronicity of global CDS markets
Hasan, I., Marra, M.
It is advisable to refer to the publisher's version if you intend to cite from this work. See Guidance on citing. To link to this item DOI: 10.1093/rcfs/cfad010 Abstract/SummaryWe analyze how creditor rights affect the nonsynchronicity of global corporate credit default swap spreads (CDS-NS). CDS-NS is negatively related to the country-level creditor-control rights, especially to the “Restrictions on reorganization” component, where creditor-shareholder conflicts are high. The effect is concentrated in firms with high investment intensity, asset growth, information opacity, and risk. Pro-creditor bankruptcy reforms led to a decline in CDS-NS, indicating lower firm-specific idiosyncratic information being priced in credit markets. A strategic-disclosure incentive among debtors avoiding creditor intervention seems more dominant than the disciplining effect, suggesting how strengthening creditor rights affects power rebalancing between creditors and shareholders.
Altmetric Deposit Details References University Staff: Request a correction | Centaur Editors: Update this record |
Lists
Lists
![[img]](/style/images/fileicons/text.png)