Credit Default Swaps and Firm Value

被引:31
作者
Narayanan, Rajesh [1 ]
Uzmanoglu, Cihan [2 ]
机构
[1] Louisiana State Univ, EJ Ourso Coll Business, Baton Rouge, LA 70803 USA
[2] SUNY Binghamton, Sch Management, Binghamton, NY 13901 USA
关键词
RISK; DEBT; DERIVATIVES; INFORMATION; RETURNS; EQUITY; INVESTMENT; GOVERNANCE; LIQUIDITY; BEHAVIOR;
D O I
10.1017/S0022109017001235
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
This article provides evidence that firm value declines when credit default swaps (CDSs) are initiated and that the effect is greater when CDS trading activity is higher. This decline, which arises from an increase in the cost of capital as opposed to a decrease in free cash flows, traces to a deterioration in the firm's credit quality and stock liquidity. Firm value declines less when CDS trading is likely to produce incremental information, suggesting that CDS trading has informational benefits for firm value. However, the evidence does not indicate that firm value increases because CDS availability facilitates investments.
引用
收藏
页码:1227 / 1259
页数:33
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