Corporate Leverage, Debt Maturity, and Credit Supply: The Role of Credit Default Swaps

Alessio Saretto B · HEATHER E. TOOKES

254 citations0/0 files storedReview of Financial Studies

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Credit Risk and Financial Regulations Corporate Finance and Governance Corporate Insolvency and Governance

Abstract

Does the ability of suppliers of corporate debt capital to hedge risk through credit default swap (CDS) contracts impact firms' capital structures? We find that firms with traded CDS contracts on their debt are able to maintain higher leverage ratios and longer debt maturities. This is especially true during periods in which credit constraints become binding, as would be expected if the ability to hedge helps alleviate frictions on the supply side of credit markets. The Author 2013. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

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References

2001Econometric Analysis of Cross Section and Panel Data 1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1977Determinants of corporate borrowing 1984The Capital Structure Puzzle 1994The Benefits of Lending Relationships: Evidence from Small Business Data 1977The Determination of Financial Structure: The Incentive-Signalling Approach 1984The Capital Structure Puzzle 1999Home Bias at Home: Local Equity Preference in Domestic Portfolios

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