Creditor-control rights and the nonsynchronicity of global CDS markets

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Hasan, I., Marra, M. orcid id iconORCID: https://orcid.org/0000-0003-0810-7323, Wu, E. and Zhang, G. (2023) Creditor-control rights and the nonsynchronicity of global CDS markets. The Review of Corporate Finance Studies. ISSN 2046-9136 doi: 10.1093/rcfs/cfad010

Abstract/Summary

We 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.

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Item Type Article
URI https://reading-clone.eprints-hosting.org/id/eprint/111250
Identification Number/DOI 10.1093/rcfs/cfad010
Refereed Yes
Divisions Henley Business School > Finance and Accounting
Uncontrolled Keywords Creditor Rights; Global Corporate CDS; Nonsynchronicity; Creditor-shareholder Conflicts
Publisher Oxford University Press
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