Credit Default Swaps and Lender Incentives in Bank Debt Renegotiations
Using a regression-discontinuity design and within lender–borrower variation, we analyze how credit default swaps (CDSs) affect bank incentives and borrower outcomes in renegotiations after covenant violations. While existing studies document an investment decline after covenant violations, we find...
Gespeichert in:
| Veröffentlicht in: | Journal of financial and quantitative analysis 2023-08, Vol.58 (5), p.1911-1942 |
|---|---|
| Hauptverfasser: | , , |
| Format: | Artikel |
| Sprache: | eng |
| Schlagworte: | |
| Online-Zugang: | Volltext |
| Tags: |
Tag hinzufügen
Keine Tags, Fügen Sie den ersten Tag hinzu!
|
| container_end_page | 1942 |
|---|---|
| container_issue | 5 |
| container_start_page | 1911 |
| container_title | Journal of financial and quantitative analysis |
| container_volume | 58 |
| creator | Chakraborty, Indraneel Chava, Sudheer Ganduri, Rohan |
| description | Using a regression-discontinuity design and within lender–borrower variation, we analyze how credit default swaps (CDSs) affect bank incentives and borrower outcomes in renegotiations after covenant violations. While existing studies document an investment decline after covenant violations, we find that covenant-violating firms maintain their investment subsequent to the introduction of CDS trading. Moreover, after CDS introduction, covenant-violating firms are less likely to default. Our results suggest that in the private debt markets, CDSs discipline borrowers, while the empty creditor problem due to CDS is mitigated because of lenders’ reputation concerns and lower coordination frictions. |
| doi_str_mv | 10.1017/S0022109022000709 |
| format | Article |
| fullrecord | <record><control><sourceid>proquest_cross</sourceid><recordid>TN_cdi_proquest_journals_2856741685</recordid><sourceformat>XML</sourceformat><sourcesystem>PC</sourcesystem><cupid>10_1017_S0022109022000709</cupid><sourcerecordid>2856741685</sourcerecordid><originalsourceid>FETCH-LOGICAL-c450t-b2bbbb2efc0a4e759dda3aa665311905e24926154a76bdb1813b95828af0a183</originalsourceid><addsrcrecordid>eNp1kEFLw0AQhRdRsFZ_gLcFz9GZTXaTHLVaLRQE23vYJJOytd3U3a3iv3dDhR7EOcwc3vfeg2HsGuEWAfO7BYAQCGXcAJBDecJGmEuVqBLVKRsNcjLo5-zC-3VkBnLEphNHrQn8kTq93wS--NI7z7Vt-ZxsS47PbEM2mE_y3Fj-oO17ZOvA38jSqg9GB9Nbf8nOOr3xdPV7x2w5fVpOXpL56_Nscj9PmkxCSGpRxxHUNaAzymXZtjrVWimZIpYgSWSlUCgznau6rbHAtC5lIQrdgcYiHbObQ-zO9R978qFa93tnY2MlCqnyDFUhI4UHqnG99466aufMVrvvCqEavlX9-Vb08IOHmt4af3QUCtIsQ4kRSX9j9bZ2pl3Rsf3_4B_EXHRj</addsrcrecordid><sourcetype>Aggregation Database</sourcetype><iscdi>true</iscdi><recordtype>article</recordtype><pqid>2856741685</pqid></control><display><type>article</type><title>Credit Default Swaps and Lender Incentives in Bank Debt Renegotiations</title><source>Business Source Complete</source><source>Cambridge Journals</source><creator>Chakraborty, Indraneel ; Chava, Sudheer ; Ganduri, Rohan</creator><creatorcontrib>Chakraborty, Indraneel ; Chava, Sudheer ; Ganduri, Rohan</creatorcontrib><description>Using a regression-discontinuity design and within lender–borrower variation, we analyze how credit default swaps (CDSs) affect bank incentives and borrower outcomes in renegotiations after covenant violations. While existing studies document an investment decline after covenant violations, we find that covenant-violating firms maintain their investment subsequent to the introduction of CDS trading. Moreover, after CDS introduction, covenant-violating firms are less likely to default. Our results suggest that in the private debt markets, CDSs discipline borrowers, while the empty creditor problem due to CDS is mitigated because of lenders’ reputation concerns and lower coordination frictions.</description><identifier>ISSN: 0022-1090</identifier><identifier>EISSN: 1756-6916</identifier><identifier>DOI: 10.1017/S0022109022000709</identifier><language>eng</language><publisher>New York, USA: Cambridge University Press</publisher><subject>Academic disciplines ; Bankruptcy ; Bargaining ; Borrowing ; Coordination ; Credit ; Credit default swaps ; Default ; Discontinuity ; Incentives ; Investitionsentscheidung ; Kreditderivat ; Kreditgeschäft ; Negotiation ; Quantitative analysis ; USA ; Vertragsrecht ; Violations</subject><ispartof>Journal of financial and quantitative analysis, 2023-08, Vol.58 (5), p.1911-1942</ispartof><rights>The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington</rights><rights>The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington. This work is licensed under the Creative Commons Attribution License http://creativecommons.org/licenses/by/4.0 (the “License”). Notwithstanding the ProQuest Terms and Conditions, you may use this content in accordance with the terms of the License.</rights><lds50>peer_reviewed</lds50><oa>free_for_read</oa><woscitedreferencessubscribed>false</woscitedreferencessubscribed><citedby>FETCH-LOGICAL-c450t-b2bbbb2efc0a4e759dda3aa665311905e24926154a76bdb1813b95828af0a183</citedby><cites>FETCH-LOGICAL-c450t-b2bbbb2efc0a4e759dda3aa665311905e24926154a76bdb1813b95828af0a183</cites><orcidid>0000-0002-9619-6911</orcidid></display><links><openurl>$$Topenurl_article</openurl><openurlfulltext>$$Topenurlfull_article</openurlfulltext><thumbnail>$$Tsyndetics_thumb_exl</thumbnail><linktohtml>$$Uhttps://www.cambridge.org/core/product/identifier/S0022109022000709/type/journal_article$$EHTML$$P50$$Gcambridge$$Hfree_for_read</linktohtml><link.rule.ids>164,314,780,784,27924,27925,55628</link.rule.ids></links><search><creatorcontrib>Chakraborty, Indraneel</creatorcontrib><creatorcontrib>Chava, Sudheer</creatorcontrib><creatorcontrib>Ganduri, Rohan</creatorcontrib><title>Credit Default Swaps and Lender Incentives in Bank Debt Renegotiations</title><title>Journal of financial and quantitative analysis</title><addtitle>J. Financ. Quant. Anal</addtitle><description>Using a regression-discontinuity design and within lender–borrower variation, we analyze how credit default swaps (CDSs) affect bank incentives and borrower outcomes in renegotiations after covenant violations. While existing studies document an investment decline after covenant violations, we find that covenant-violating firms maintain their investment subsequent to the introduction of CDS trading. Moreover, after CDS introduction, covenant-violating firms are less likely to default. Our results suggest that in the private debt markets, CDSs discipline borrowers, while the empty creditor problem due to CDS is mitigated because of lenders’ reputation concerns and lower coordination frictions.</description><subject>Academic disciplines</subject><subject>Bankruptcy</subject><subject>Bargaining</subject><subject>Borrowing</subject><subject>Coordination</subject><subject>Credit</subject><subject>Credit default swaps</subject><subject>Default</subject><subject>Discontinuity</subject><subject>Incentives</subject><subject>Investitionsentscheidung</subject><subject>Kreditderivat</subject><subject>Kreditgeschäft</subject><subject>Negotiation</subject><subject>Quantitative analysis</subject><subject>USA</subject><subject>Vertragsrecht</subject><subject>Violations</subject><issn>0022-1090</issn><issn>1756-6916</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2023</creationdate><recordtype>article</recordtype><sourceid>IKXGN</sourceid><sourceid>ABUWG</sourceid><sourceid>AFKRA</sourceid><sourceid>BENPR</sourceid><sourceid>CCPQU</sourceid><sourceid>DWQXO</sourceid><recordid>eNp1kEFLw0AQhRdRsFZ_gLcFz9GZTXaTHLVaLRQE23vYJJOytd3U3a3iv3dDhR7EOcwc3vfeg2HsGuEWAfO7BYAQCGXcAJBDecJGmEuVqBLVKRsNcjLo5-zC-3VkBnLEphNHrQn8kTq93wS--NI7z7Vt-ZxsS47PbEM2mE_y3Fj-oO17ZOvA38jSqg9GB9Nbf8nOOr3xdPV7x2w5fVpOXpL56_Nscj9PmkxCSGpRxxHUNaAzymXZtjrVWimZIpYgSWSlUCgznau6rbHAtC5lIQrdgcYiHbObQ-zO9R978qFa93tnY2MlCqnyDFUhI4UHqnG99466aufMVrvvCqEavlX9-Vb08IOHmt4af3QUCtIsQ4kRSX9j9bZ2pl3Rsf3_4B_EXHRj</recordid><startdate>20230801</startdate><enddate>20230801</enddate><creator>Chakraborty, Indraneel</creator><creator>Chava, Sudheer</creator><creator>Ganduri, Rohan</creator><general>Cambridge University Press</general><scope>IKXGN</scope><scope>OQ6</scope><scope>AAYXX</scope><scope>CITATION</scope><scope>3V.</scope><scope>7WY</scope><scope>7WZ</scope><scope>7X1</scope><scope>7XB</scope><scope>87Z</scope><scope>8A9</scope><scope>8BJ</scope><scope>8FK</scope><scope>8FL</scope><scope>ABUWG</scope><scope>AFKRA</scope><scope>ANIOZ</scope><scope>BENPR</scope><scope>BEZIV</scope><scope>CCPQU</scope><scope>DWQXO</scope><scope>FQK</scope><scope>FRAZJ</scope><scope>FRNLG</scope><scope>F~G</scope><scope>JBE</scope><scope>K60</scope><scope>K6~</scope><scope>L.-</scope><scope>M0C</scope><scope>PQBIZ</scope><scope>PQBZA</scope><scope>PQEST</scope><scope>PQQKQ</scope><scope>PQUKI</scope><scope>Q9U</scope><scope>S0X</scope><orcidid>https://orcid.org/0000-0002-9619-6911</orcidid></search><sort><creationdate>20230801</creationdate><title>Credit Default Swaps and Lender Incentives in Bank Debt Renegotiations</title><author>Chakraborty, Indraneel ; Chava, Sudheer ; Ganduri, Rohan</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c450t-b2bbbb2efc0a4e759dda3aa665311905e24926154a76bdb1813b95828af0a183</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2023</creationdate><topic>Academic disciplines</topic><topic>Bankruptcy</topic><topic>Bargaining</topic><topic>Borrowing</topic><topic>Coordination</topic><topic>Credit</topic><topic>Credit default swaps</topic><topic>Default</topic><topic>Discontinuity</topic><topic>Incentives</topic><topic>Investitionsentscheidung</topic><topic>Kreditderivat</topic><topic>Kreditgeschäft</topic><topic>Negotiation</topic><topic>Quantitative analysis</topic><topic>USA</topic><topic>Vertragsrecht</topic><topic>Violations</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Chakraborty, Indraneel</creatorcontrib><creatorcontrib>Chava, Sudheer</creatorcontrib><creatorcontrib>Ganduri, Rohan</creatorcontrib><collection>Cambridge Journals Open Access</collection><collection>ECONIS</collection><collection>CrossRef</collection><collection>ProQuest Central (Corporate)</collection><collection>ABI/INFORM Collection</collection><collection>ABI/INFORM Global (PDF only)</collection><collection>Accounting & Tax Database</collection><collection>ProQuest Central (purchase pre-March 2016)</collection><collection>ABI/INFORM Global (Alumni Edition)</collection><collection>Accounting & Tax Database (Alumni Edition)</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>ProQuest Central (Alumni) (purchase pre-March 2016)</collection><collection>ABI/INFORM Collection (Alumni Edition)</collection><collection>ProQuest Central (Alumni Edition)</collection><collection>ProQuest Central UK/Ireland</collection><collection>Accounting, Tax & Banking Collection</collection><collection>ProQuest Central</collection><collection>Business Premium Collection</collection><collection>ProQuest One Community College</collection><collection>ProQuest Central Korea</collection><collection>International Bibliography of the Social Sciences</collection><collection>Accounting, Tax & Banking Collection (Alumni)</collection><collection>Business Premium Collection (Alumni)</collection><collection>ABI/INFORM Global (Corporate)</collection><collection>International Bibliography of the Social Sciences</collection><collection>ProQuest Business Collection (Alumni Edition)</collection><collection>ProQuest Business Collection</collection><collection>ABI/INFORM Professional Advanced</collection><collection>ABI/INFORM Global</collection><collection>ProQuest One Business</collection><collection>ProQuest One Business (Alumni)</collection><collection>ProQuest One Academic Eastern Edition (DO NOT USE)</collection><collection>ProQuest One Academic</collection><collection>ProQuest One Academic UKI Edition</collection><collection>ProQuest Central Basic</collection><collection>SIRS Editorial</collection><jtitle>Journal of financial and quantitative analysis</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Chakraborty, Indraneel</au><au>Chava, Sudheer</au><au>Ganduri, Rohan</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Credit Default Swaps and Lender Incentives in Bank Debt Renegotiations</atitle><jtitle>Journal of financial and quantitative analysis</jtitle><addtitle>J. Financ. Quant. Anal</addtitle><date>2023-08-01</date><risdate>2023</risdate><volume>58</volume><issue>5</issue><spage>1911</spage><epage>1942</epage><pages>1911-1942</pages><issn>0022-1090</issn><eissn>1756-6916</eissn><abstract>Using a regression-discontinuity design and within lender–borrower variation, we analyze how credit default swaps (CDSs) affect bank incentives and borrower outcomes in renegotiations after covenant violations. While existing studies document an investment decline after covenant violations, we find that covenant-violating firms maintain their investment subsequent to the introduction of CDS trading. Moreover, after CDS introduction, covenant-violating firms are less likely to default. Our results suggest that in the private debt markets, CDSs discipline borrowers, while the empty creditor problem due to CDS is mitigated because of lenders’ reputation concerns and lower coordination frictions.</abstract><cop>New York, USA</cop><pub>Cambridge University Press</pub><doi>10.1017/S0022109022000709</doi><tpages>32</tpages><orcidid>https://orcid.org/0000-0002-9619-6911</orcidid><oa>free_for_read</oa></addata></record> |
| fulltext | fulltext |
| identifier | ISSN: 0022-1090 |
| ispartof | Journal of financial and quantitative analysis, 2023-08, Vol.58 (5), p.1911-1942 |
| issn | 0022-1090 1756-6916 |
| language | eng |
| recordid | cdi_proquest_journals_2856741685 |
| source | Business Source Complete; Cambridge Journals |
| subjects | Academic disciplines Bankruptcy Bargaining Borrowing Coordination Credit Credit default swaps Default Discontinuity Incentives Investitionsentscheidung Kreditderivat Kreditgeschäft Negotiation Quantitative analysis USA Vertragsrecht Violations |
| title | Credit Default Swaps and Lender Incentives in Bank Debt Renegotiations |
| url | https://sfx.bib-bvb.de/sfx_tum?ctx_ver=Z39.88-2004&ctx_enc=info:ofi/enc:UTF-8&ctx_tim=2025-01-05T19%3A27%3A55IST&url_ver=Z39.88-2004&url_ctx_fmt=infofi/fmt:kev:mtx:ctx&rfr_id=info:sid/primo.exlibrisgroup.com:primo3-Article-proquest_cross&rft_val_fmt=info:ofi/fmt:kev:mtx:journal&rft.genre=article&rft.atitle=Credit%20Default%20Swaps%20and%20Lender%20Incentives%20in%20Bank%20Debt%20Renegotiations&rft.jtitle=Journal%20of%20financial%20and%20quantitative%20analysis&rft.au=Chakraborty,%20Indraneel&rft.date=2023-08-01&rft.volume=58&rft.issue=5&rft.spage=1911&rft.epage=1942&rft.pages=1911-1942&rft.issn=0022-1090&rft.eissn=1756-6916&rft_id=info:doi/10.1017/S0022109022000709&rft_dat=%3Cproquest_cross%3E2856741685%3C/proquest_cross%3E%3Curl%3E%3C/url%3E&disable_directlink=true&sfx.directlink=off&sfx.report_link=0&rft_id=info:oai/&rft_pqid=2856741685&rft_id=info:pmid/&rft_cupid=10_1017_S0022109022000709&rfr_iscdi=true |