Empty creditors and strong shareholders : the real effects of credit risk trading ; second draft / Stefano Colonnello, Matthias Efing, Francesca Zucchi
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Empty creditors and strong shareholders
Discovery
861783921
URN
urn:nbn:de:gbv:3:2-59448
DOI
ISBN
ISSN
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Skalierung
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Publication history
Halle (Saale), Germany : Halle Institute for Economic Research (IWH), June 2016
Content
1 Online-Ressource (40 Seiten, VI = 1,18 MB)
Edition
Second draft: May 31, 2016
Language
eng
Comment
Abstract
Credit derivatives give creditors the possibility to transfer debt cash flow rights to other market participants while retaining control rights. We use the market for credit default swaps (CDSs) as a laboratory to show that the real effects of such debt unbundling crucially hinge on shareholder bargaining power. We find that creditors buy more CDS protection when facing strong shareholders to secure themselves a valuable outside option in distressed renegotiations. After the start of CDS trading, the distance-to-default, investment, and market value of firms with powerful shareholders drop by 7.9%, 7%, and 8.8% compared to other firms.
Series
IWH-Diskussionspapiere ; no. 10/2016 [rev.] ppn:837399270