M&amp;A operations: Further evidence of informed trading in the CDS market

Silva, Paulo Pereira da; Vieira, Isabel; Vieira, Carlos

doi:10.1016/j.mulfin.2015.10.002

Cited by 10 publications

(2 citation statements)

References 64 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…The existence of bi-directional information flows between CDS and stock markets (Acharya & Johnson, 2007;da Silva et al, 2015;Han & Zhou, 2015;Lee et al, 2018;Marsh & Wagner, 2016;Qiu & Fan, 2012) and between CDS and bond markets (Blanco et al, 2005) is empirically documented in several studies. iii The information flows from CDS to stock and bond prices are keener in the aftermath of negative credit news and/or for firms which have a greater number of bank relationships (Acharya & Johnson, 2007;Qiu & Fan, 2012).…”

Section: Literature Review and Research Hypothesismentioning

confidence: 99%

Stock price informativeness and credit default swap trading

Silva

Vieira

2023

Int. J Fin Econ

Self Cite

View full text Add to dashboard Cite

This study develops a difference‐in‐differences analysis to assess whether trading onset of credit default swaps (CDS) on a firm's debt improves price informativeness in the stock market. Price informativeness is measured by the future earnings response coefficient, which captures the amount of information about future earnings conveyed in stock returns. Our sample comprises U.S. firms (firms experiencing CDS trading on their debt and a group of control firms) and covers the period 1997–2015. The results indicate that CDS hinder stock price informativeness, and thus the ability of prices to track long‐term fundamentals, especially before the arrival of negative information about the obligor. The identified impact is stronger when CDS are first traded, becoming less pervasive with the passage of time. Finally, the results indicate that effects were residual during the early stages of CDS market development and peaked during the period 2004–2008. The impact of CDS introduction weakened after new regulation and ISDA protocols entry into force in 2009. This empirical analysis contributes to the literature by improving knowledge on the consequences of CDS trading on economic and financial outcomes. It points out a negative effect on price informativeness in the stock market and indicates that it was smoothed by regulatory measures designed to improve market infrastructure and transparency.

show abstract

Section: Literature Review and Research Hypothesismentioning

confidence: 99%

Stock price informativeness and credit default swap trading

Silva

Vieira

2023

Int. J Fin Econ

Self Cite

View full text Add to dashboard Cite

show abstract

“…While emphasizing the fact that efficient market theory is based on a timely incorporation of relevant information into asset prices, authors distinguish three forms of market efficiency (Roberts, 1959;Fama, 1970): (i) a weak form where the available information concerns only the historical prices and market's past behavior (Sensoy et al, 2017), (ii) a semi-strong form in which the information sequence is rather composed by publicly released information (earnings surprises, rating publications, credit events, M&A announcements, financial accounts disclosure...) (Zhang and Zhang, 2013;Norden and Weber, 2004;da Silva et al, 2015;Jenkins et al, 2016;Kiesel et al, 2016;Norden, 2017), and (iii) a strong form in which the information set made of pertinent private information -initially held by investors or financial groups in a monopolistic way -that have been recently released.…”

Section: Theoretical Background On the Efficient Market Hypothesismentioning

confidence: 99%

On the informational market efficiency of the worldwide sovereign credit default swaps

Sabkha¹,

Peretti²,

Hmaied³

2019

J Asset Manag

View full text Add to dashboard Cite

In this globalized world, market efficiency is one of the main determinants of country positions in the international economic and financial space. Aware of this crucial issue, this article aims to provide further evidence on the weak form of the Efficiency Hypothesis in Sovereign CDS markets in 37 countries around the world from January 2006 to March 2017. The econometric framework used in this research is based on a VECM-FIGARCH(1,d,1) approach that considers for long term equilibrium as well as volatility stylized facts such as clustering and long-memory. Based on the entire period analysis and against all odds, the results clearly reject the randomness of each CDS spread studied. However, the sub-period analysis shows significant evidence of structural breaks in the price predictability pattern, characterized by some efficiency decline over the last two financial tensions. The significant impact of crises on market efficiency is all the more justified because, during the post-crisis period, historical prices are found to be completely irrelevant in predicting current spreads. Moreover, our results show that each country of the economically heterogeneous studied sample exhibit different efficiency status that cannot be adequately explained by the sovereign credit risk level.

show abstract

Assessing the strategic fit of potential M&As in Chinese banking: A novel Bayesian stochastic frontier approach

Chen

Tsionas

2018

Economic Modelling

View full text Add to dashboard Cite

Banking in China is well-known for being extremely fragmented, thus making the analysis of the sector a not straightforward task. This research aims to explore the strategic fit of potential mergers and acquisitions in the Chinese banking industry. When the operations of two banks are jointly analyzed this means that the inputs and the outputs of these two individual banks are somehow combined in an attempt to better understand the sector as a whole. A novel SFA model with Bayesian inference on input/output prices is proposed to assess the impact of business-related variables on efficiency levels. The results not only reveal that bank size, type, and origin present a significant impact on individual technical efficiency levels, but also exert a significant impact on the efficiency frontier of the industry. The strategic fit of M&A in the Chinese banking industry strongly relies on opportunities derived from banking automation that may arise from acquiring technologically obsolete small banks. Big and foreign banks also exert a positive impact on the technological catch-up of Chinese banks, which may suggest opportunities for sector deregulation.JEL Classification: C6, G21, G34

show abstract

M&A operations: Further evidence of informed trading in the CDS market

Cited by 10 publications

References 64 publications

Stock price informativeness and credit default swap trading

Stock price informativeness and credit default swap trading

On the informational market efficiency of the worldwide sovereign credit default swaps

Assessing the strategic fit of potential M&As in Chinese banking: A novel Bayesian stochastic frontier approach

Contact Info

Product

Resources

About