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CDS Trading Initiation, Information Asymmetry, and Dividend Payout

This study uses an information-asymmetry framework to examine the effect of initiation of credit default swaps (CDS) trading on firm dividend payout policy. We find evidence that CDS initiation is associated with increasing dividends, which is consistent with firms distributing excess free cash flow to mitigate exacerbated manager-equityholder agency conflicts resulting from reduced monitoring by banks following CDS initiation. Additional findings support this explanation by showing that the dividend increases are concentrated among borrowing firms with higher agency cost before CDS initiation, among firms whose lead arranger banks have a relatively less strong reputation in the loan-syndication market, and among firms whose loans are subject to less intense monitoring features—that is, less restrictive loan covenants—following CDS initiation. Additional analyses also suggest that inferences are robust to controlling for the potential effects of CDS initiation on capital structure.

Ketersediaan

Informasi Detail

Judul Seri

MANAGEMENT SCIENCE; Vol.69 No.1 January 2023

No. Panggil

-

Penerbit

: .,

Deskripsi Fisik

p. 684-701

Bahasa

English

ISBN/ISSN

-

Klasifikasi

NONE

Tipe Isi

-

Tipe Media

-

Tipe Pembawa

-

Edisi

-

Subjek

AGENCY COSTS
CDS TRADING
DIVIDENT PAYOUT

Info Detail Spesifik

https://doi.org/10.1287/mnsc.2022.4337

Pernyataan Tanggungjawab

Wayne R. Landsman, Chao Kevin Li, Jianxin Donny Zhao

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