Credit default swaps and firms' financing policies

Kathleen P. Fuller; Serhat Yildiz; Yurtsev Uymaz

doi:10.1016/j.jcorpfin.2017.10.004

Credit default swaps and firms' financing policies

Kathleen P. Fuller, Serhat Yildiz, Yurtsev Uymaz

Research output: Contribution to journal › Article › peer-review

11 Citations (Scopus)

17 Downloads (Pure)

Abstract

This paper examines the impact of credit default swaps (CDS) on firms' financing and trade credit policies. Our results indicate firms with CDS trading on their debt increase their equity issuances. Further, firms with CDS trading on their debt and high levels of long-term debt issuances decrease their debt financing. Total and idiosyncratic risks are also higher for firms with CDS trading on their debt. These firms pay their suppliers and collect from their customers quicker. Thus, the impacts of the CDS market are not limited to the borrowing firms but also affect economically connected firms.

Original language	English
Pages (from-to)	34-48
Number of pages	15
Journal	Journal of Corporate Finance
Volume	48
Early online date	19 Oct 2017
DOIs	https://doi.org/10.1016/j.jcorpfin.2017.10.004
Publication status	Published - 1 Feb 2018

Keywords

Credit default swaps
Capital structure
Trade credit

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10.1016/j.jcorpfin.2017.10.004

Accepted manuscriptAccepted author manuscript, 693 KBLicence: CC BY-NC-ND

Yurtsev Uymaz
- Y.Uymazuea.acuk
- Norwich Business School - Associate Professor in Finance
- Finance Group - Member
Person: Research Group Member, Academic, Teaching & Research

Cite this

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abstract = "This paper examines the impact of credit default swaps (CDS) on firms' financing and trade credit policies. Our results indicate firms with CDS trading on their debt increase their equity issuances. Further, firms with CDS trading on their debt and high levels of long-term debt issuances decrease their debt financing. Total and idiosyncratic risks are also higher for firms with CDS trading on their debt. These firms pay their suppliers and collect from their customers quicker. Thus, the impacts of the CDS market are not limited to the borrowing firms but also affect economically connected firms.",

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AB - This paper examines the impact of credit default swaps (CDS) on firms' financing and trade credit policies. Our results indicate firms with CDS trading on their debt increase their equity issuances. Further, firms with CDS trading on their debt and high levels of long-term debt issuances decrease their debt financing. Total and idiosyncratic risks are also higher for firms with CDS trading on their debt. These firms pay their suppliers and collect from their customers quicker. Thus, the impacts of the CDS market are not limited to the borrowing firms but also affect economically connected firms.

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Credit default swaps and firms' financing policies

Abstract

Keywords

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Yurtsev Uymaz

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