Insider Trading Along Supply Chain Network in Credit Derivatives
Posted: 31 Jan 2018
Date Written: January 23, 2018
In this paper, using news reflected in the stock market as a benchmark for the public information of suppliers, we find significant incremental information revelation in the credit default swap market of the customers. The information revelation is more significant during the periods when either suppliers or customers announce their earnings. Our results are consistent with the arguments 1) when facing suppliers’ earnings announcements, investors actively seek insider information revealed by customers’ CDS trading; or 2) when customers announce their earnings, the insider information revealed by customers’ CDS trading is pushed to the equity investors of the suppliers.
Keywords: Supply Chain, Operational Risk, Credit Default Swap (CDS), Information Asymmetry
JEL Classification: G3
Suggested Citation: Suggested Citation