재무연구 제 권 호 (2018년 5월)
Asian Review of Financial Research, Vol., No..
pp.165~205
pp.165~205
The Role of Credit Default Swaps in Determining Corporate Payout Policy
Hwang Hee Lee Ph.D. Student, KAIST College of Business, Korea Advanced Institute of Science and Technology
Frederick Dongchuhl Oh Associate Professor, KAIST College of Business, Korea Advanced Institute of Science and Technology
We examine how the introduction of credit default swap (CDS) trading on the debt of individual firms affects corporate payout policy. We find that firms increase payouts to shareholders after the introduction of CDS trading on their debt. This suggests that CDS-referenced firms determine payout policy in response to decreased creditor monitoring rather than apply more conservative policies to avoid renegotiations with tougher CDS-insured creditors. Moreover, the increase in payouts after CDS introduction is more pronounced in firms with smaller institutional ownership and greater bank debt dependency. Finally, we show that firms tend to repurchase stocks rather than increase dividends when they increase payouts after the introduction of CDS trading. (JEL G32, G35)
Hwang Hee Lee
Frederick Dongchuhl Oh
We examine how the introduction of credit default swap (CDS) trading on the debt of individual firms affects corporate payout policy. We find that firms increase payouts to shareholders after the introduction of CDS trading on their debt. This suggests that CDS-referenced firms determine payout policy in response to decreased creditor monitoring rather than apply more conservative policies to avoid renegotiations with tougher CDS-insured creditors. Moreover, the increase in payouts after CDS introduction is more pronounced in firms with smaller institutional ownership and greater bank debt dependency. Finally, we show that firms tend to repurchase stocks rather than increase dividends when they increase payouts after the introduction of CDS trading. (JEL G32, G35)
