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Credit risk and governance: evidence from credit default swap spreads

Akdoğu, Evrim and Alp, Aysun (2016) Credit risk and governance: evidence from credit default swap spreads. (Accepted/In Press)

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Official URL: http://www.sciencedirect.com/science/article/pii/S1544612316300265

Abstract

In this paper, we examine the effect of shareholder governance mechanisms on the firms’ credit risk through credit default swap spreads. Our results suggest that higher antitakeover provisions decrease the price of debt. We find that on average, addition of one antitakeover provision lowers the CDS spread by 3.46 basis points. In addition, we find that this effect is more pronounced for smaller, highly levered, low-rated, and less profitable firms. Since these firms arguably carry a higher financial distress risk, it appears that bondholders favor weaker shareholder governance when the conflict of interest between the shareholders and the bondholders peak.

Item Type:Article
Subjects:H Social Sciences > HG Finance > HG4001-4285 Financial management. Business finance. Corporation finance
ID Code:30442
Deposited By:Evrim Akdoğu
Deposited On:06 Nov 2016 14:34
Last Modified:10 Nov 2016 10:12

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