Credit Risk Spillovers among Financial Institutions around the Global Credit Crisis: Firm-Level Evidence

Management Science, Forthcoming

52 Pages Posted: 12 Oct 2010 Last revised: 25 Dec 2012

Jian Yang

University of Colorado at Denver - Business School

Yinggang Zhou

Xiamen University - Department of Finance

Date Written: July 10, 2012

Abstract

Using credit default swap data, we propose a novel empirical framework to identify the structure of credit risk networks across international major financial institutions around the recent global credit crisis. Specifically, we identify three groups of players including prime senders, exchange centers and prime receivers of credit risk information. Leverage ratios and particularly the short-term debt ratio appear to be significant determinants of the roles of financial institutions in credit risk transfer, while corporate governance indexes, size, credit risk and liquidity premiums as well as asset write-downs are not significant. Our findings carry important implications for new regulatory standard on capital sub-charge and liquidity coverage ratio.

Suggested Citation

Yang, Jian and Zhou, Yinggang, Credit Risk Spillovers among Financial Institutions around the Global Credit Crisis: Firm-Level Evidence (July 10, 2012). Management Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1691111 or http://dx.doi.org/10.2139/ssrn.1691111

Jian Yang (Contact Author)

University of Colorado at Denver - Business School ( email )

1250 14th St.
Denver, CO 80204
United States

Yinggang Zhou

Xiamen University - Department of Finance ( email )

Xiamen, Fujian 361005
China

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