Abstract

http://ssrn.com/abstract=1660515
 
 

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Corporate Leverage, Debt Maturity and Credit Default Swaps: The Role of Credit Supply


Heather Tookes


Yale University - Yale School of Management; Yale University - International Center for Finance

Alessio Saretto


University 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 series


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Date posted: August 18, 2010 ; Last revised: July 1, 2012

Suggested Citation

Tookes, Heather and Saretto, Alessio, Corporate Leverage, Debt Maturity and Credit Default Swaps: The Role of Credit Supply (March 7, 2011). Available at SSRN: http://ssrn.com/abstract=1660515 or http://dx.doi.org/10.2139/ssrn.1660515

Contact Information

Heather Tookes
Yale University - Yale School of Management ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
Yale University - International Center for Finance ( email )
Box 208200
New Haven, CT 06520
United States
Alessio Saretto (Contact Author)
University of Texas at Dallas - School of Management - Department of Finance & Managerial Economics ( email )
800 Campbell Road
SM 31
Richardson, TX 75080
United States
972-883-5907 (Phone)
HOME PAGE: http://www.utdallas.edu/~axs125732
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