Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/108310
Authors: 
Danis, András
Year of Publication: 
2013
Series/Report no.: 
IEHAS Discussion Papers MT-DP - 2013/34
Abstract: 
I examine the effect of credit default swaps (CDSs) on the restructuring of distressed firms. Theoretically, I show that if bondholders are insured with CDSs, the participation rate in a restructuring decreases. Using a sample of distressed exchange offers, I estimate that the participation rate is 29% lower if the firm has CDSs traded on its debt, compared to an unconditional mean of 54%. I use the introduction of the Big Bang protocol as a natural experiment. The results suggest that firms with CDSs find it difficult to reduce debt out-of-court, which is inefficient because it increases the likelihood of future bankruptcy.
Subjects: 
credit default swaps
CDS
empty creditor
restructuring
bankruptcy
JEL: 
G33
G34
ISBN: 
978-615-5243-94-3
Document Type: 
Working Paper

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