What determines bank CDS spreads? Evidence from European and US banks

Abstract

We examine the determinants of CDS spreads for a sample of European and US banks. The key balance sheet determinants are leverage, asset quality, funding stability, and bank size, and the key market determinants are equity returns, the term structure of interest rates and bank-specific and host country sovereign credit risk. Our results would appear to confirm the applicability of Merton (1974)-type models extended to include market variables to the understanding of bank credit risk.

Do ESG scores effect bank risk taking and value? Evidence from European banks

“…For robustness, we present results employing several measures of bank risk and bank value commonly used in the empirical literature. Bank risk is measured by the z score of each bank (e.g., Altunbaş et al,2017; Laeven & Levine,2009), the CDS spread (e.g., Drago et al,2019; Drago, Di Tommaso, & Thornton,2017), and the ratio of banks nonperforming loans to total loans (e.g., Schulte & Winkler,2019). Bank value is measured by Tobin's q , (e.g., Bolton,2013; Gompers, Ishii, & Metrick,2003), the book value of capital (e.g., Abuzayed, Molyneux, & Al‐Fayoumi,2009) and, indirectly, from banks' equity price (e.g., Khanna & Sonti,2004).…”

Risk Profile Indicators and Spanish Banks’ Probability of Default from a Regulatory Approach

“…At the same time, research using market information as a complement to accounting indicators has been based on Merton's [22] approach to modelling the risk of credit defaults. Some studies have used credit risk spread CDs [23][24][25][26][27][28][29][30][31] or credit ratings [32][33][34].…”

Influences of tax sanctions, taxpayers awareness and social norms on motivation to meet tax obligation

“…Hallsworth et al (2017), suggesting that reciprocation in this context means that the motivation to comply with taxes depends on the perceived service and quality of the country/government received by the citizens in return for their tax payments (this is also related to the concept of conditional cooperation (Frey & Meier, 2004). In compliance studies and intrinsic motivation such as, (Slemrod et al, 2001;Kleven et al, 2011;Castro & Scartascini, 2015;Pomeranz 2015;Dwenger et al, 2016;Boyer et al, 2016;Hallsworth et al, 2017;Bott et al, 2017;Drago et al, 2017), concluded that the anatomy of taxpayers ' behavior is related to social norms personally in the context of different moral behaviors, in fulfilling taxation obligations. Luttmer & Singhal (2014), Doerrenberg & peichl (2017) argued that moral tax is indeed an important component of tax compliance decisions, although law enforcement is the primary driver of compliance.…”