Distressed Debt Restructuring in the Presence of Credit Default Swaps

The availability of credit insurance via credit default swaps has been closely associated with the emergence of empty creditors. We empirically investigate this issue by looking at the debt restructurings (distressed exchanges and bankruptcy filings) of rated, nonfinancial U. S. companies over the p...

Full description

Saved in:
Bibliographic Details
Published inJournal of money, credit and banking Vol. 48; no. 1; pp. 165 - 201
Main Authors BEDENDO, MASCIA, CATHCART, LARA, EL-JAHEL, LINA
Format Journal Article
LanguageEnglish
Published Columbus Blackwell Publishing Ltd 01.02.2016
Wiley Subscription Services
Ohio State University Press
Wiley
Subjects
Bankruptcy
Business administration
Credit default swaps
Credit insurance
Creditors
Debt restructuring
E51
empty creditors
G32
G33
Humanities and Social Sciences
Studies
United States
United States > US
Credit default swaps
Debt restructuring
Empty creditors
Online AccessGet full text

Cover

More Information
Summary:The availability of credit insurance via credit default swaps has been closely associated with the emergence of empty creditors. We empirically investigate this issue by looking at the debt restructurings (distressed exchanges and bankruptcy filings) of rated, nonfinancial U. S. companies over the period January 2007-June 2011. Using different proxies for the existence of insured creditors, we do not find evidence that the access to credit insurance favors bankruptcy over a debt workout. However, we document higher recovery prices following a distressed exchange in firms where empty creditors are more likely to emerge.
Bibliography:ark:/67375/WNG-0SMQGS7S-V
ArticleID:JMCB12294
istex:A8A2F449029B656EB3E9E930DEB496F21ECE2C3F
The paper was previously circulated with the title “In‐ and Out‐of‐Court Debt Restructuring in the Presence of Credit Default Swaps.” We thank an anonymous referee, Yakov Amihud, Paolo Colla, Mark Flannery, Vidhan Goyal, Issam Hallak, Christopher James, Martin Oehmke, Josef Zechner, conference participants at the 2011 Financial Intermediation Research Society Meeting, the 2012 Frontiers of Finance conference, the 2012 Northern Finance Association Meeting, the 2013 Western Finance Association Meeting, and seminar participants at Bocconi University, Queen Mary University, University of Konstanz for suggestions and comments. We acknowledge financial support from Carefin (Bocconi Centre for Applied Research in Finance).
ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
content type line 23
ISSN:0022-2879
1538-4616
DOI:10.1111/jmcb.12294