Cross-Listings and the Dynamics between Credit and Equity Returns

92 Pages Posted: 16 Sep 2015 Last revised: 16 May 2019

See all articles by Patrick Augustin

Patrick Augustin

McGill University, Desautels Faculty of Management

Feng Jiao

University of Lethbridge - Faculty of Management

Sergei Sarkissian

McGill University; University of Edinburgh

Michael J. Schill

University of Virginia - Darden School of Business

Date Written: April 18, 2017

Abstract

We study how listing in multiple markets affects the dynamics between firms’ credit default swap (CDS) and stock returns. We find that cross-listing increases (i) the sensitivity of CDS to stock returns; (ii) the integration of CDS with world equity and bond markets; and (iii) the statistical synchronicity of CDS and stock prices. Our results are stronger for firms with greater media attention, analyst and CDS coverage, Google search intensity, and for listings in familiar markets. We suggest that a firm’s presence in global equity markets comes with an improvement in the credit-equity integration through a reduction of informational frictions.

Keywords: Investor recognition, Limits to arbitrage, Return co-movement, Risk premium

JEL Classification: G12, G13, G14, G15

Suggested Citation

Augustin, Patrick and Jiao, Feng and Sarkissian, Sergei and Schill, Michael J., Cross-Listings and the Dynamics between Credit and Equity Returns (April 18, 2017). Darden Business School Working Paper No. 2660829. Available at SSRN: https://ssrn.com/abstract=2660829 or http://dx.doi.org/10.2139/ssrn.2660829

Patrick Augustin

McGill University, Desautels Faculty of Management ( email )

1001 Sherbrooke Street West
Quebec
Montreal, Quebec H3A 1G5
Canada

HOME PAGE: http://www.patrickaugustin.se

Feng Jiao

University of Lethbridge - Faculty of Management ( email )

4401 University Drive
Lethbridge, Alberta TIK 3M4
Canada

Sergei Sarkissian (Contact Author)

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada
514-398-4876 (Phone)
514-398-3876 (Fax)

HOME PAGE: http://sergei-sarkissian.com

University of Edinburgh

29 Buccleuch Pl.
Edinburgh, Scotland EH8 9JS
United Kingdom

Michael J. Schill

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4071 (Phone)
434-243-7676 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/schill.htm

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