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Corporate Leverage, Debt Maturity and Credit Default Swaps: The Role of Credit SupplyHeather TookesYale University - Yale School of Management; Yale University - International Center for Finance Alessio SarettoUniversity of Texas at Dallas - School of Management - Department of Finance & Managerial Economics March 7, 2011 Abstract: 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 working papers seriesDate posted: August 18, 2010 ; Last revised: July 1, 2012Suggested CitationContact Information
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