Withholding Bad News in the Face of Credit Default Swap Trading: Evidence from Stock Price Crash Risk
研究发现信用违约互换交易能降低企业未来股价崩盘风险，因为CDS市场通过跨市场信息溢出促使坏消息融入股价，从而抑制企业信息隐瞒行为。
Abstract Credit default swaps (CDSs) are a major financial innovation related to debt contracting. Because CDS markets facilitate bad news being incorporated into equity prices via cross-market information spillover, CDS availability may curb firms’ information hoarding. We find that CDS trading on a firm’s debt reduces the future stock price crash risk. This effect is stronger in active CDS markets, when the main lenders are CDS market dealers with securities trading subsidiaries, or when managers have more motivation to hoard information. Our findings suggest that debt market financial innovations curtail the negative equity market effects of firms withholding bad news.