Accounting Information Releases and CDS Spreads

48 Pages Posted: 29 Jun 2011 Last revised: 17 Mar 2012

Redouane Elkamhi

University of Toronto - Rotman School of Management

Kris Jacobs

University of Houston - C.T. Bauer College of Business

Hugues Langlois

HEC Paris

Chayawat Ornthanalai

University of Toronto - Rotman School of Management

Date Written: January 19, 2012

Abstract

We show that accounting information releases generate large and immediate price impacts, i.e. jumps, in credit default swap (CDS) spreads. Our approach is multivariate, which allows for identification of information events under the presence of confounding news, such as credit events and other simultaneous news arrivals. The economic impact of accounting news releases is twice as large as the impact of credit-related news. Good and bad news impact jumps in CDS spreads asymmetrically, and unscheduled announcements are more likely to cause jumps than scheduled ones. The arrival of accounting information is quickly absorbed in CDS spreads, suggesting efficient price discovery in the CDS market.

Keywords: Accounting information; CDS; jumps; market integration

JEL Classification: G10; G29

Suggested Citation

Elkamhi, Redouane and Jacobs, Kris and Langlois, Hugues and Ornthanalai, Chayawat, Accounting Information Releases and CDS Spreads (January 19, 2012). Midwest Finance Association 2012 Annual Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1874127 or http://dx.doi.org/10.2139/ssrn.1874127

Redouane Elkamhi

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada

Kris Jacobs

University of Houston - C.T. Bauer College of Business ( email )

Houston, TX 77204-6021
United States

Hugues Langlois

HEC Paris ( email )

1, rue de la Liberation
Jouy-en-Josas, 78351
France
+330674462717 (Phone)

HOME PAGE: http://hugueslanglois.com

Chayawat Ornthanalai (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada

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