Corporate Leverage, Debt Maturity and Credit Default Swaps: The Role of Credit Supply
Yale University - Yale School of Management; Yale University - International Center for Finance
University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics
March 7, 2011
Does the ability of suppliers of debt to hedge risk through credit default swap (CDS) contracts impact firms' capital structures? This paper uses CDS markets as a proxy for a relaxation of firms' credit supply constraints and tests whether supply frictions impact capital structure and debt maturity. 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.
Number of Pages in PDF File: 55
Keywords: Leverage, Debt Maturity, CDS, Capital Supply
JEL Classification: G32
Date posted: August 18, 2010 ; Last revised: July 1, 2012
© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollobot1 in 0.172 seconds