CDS Trading and Stock Price Crash Risk

UNIVERSITY OF TECHNOLOGY SYDNEY

Finance Discipline Group Research Seminars in Finance

Topic: CDS Trading and Stock Price Crash Risk

Speaker: Dragon Tang, University of Hong Kong

Abstract: We find that stock crash risk is lower after the inception of credit default swaps (CDS) trading. This finding is consistent with the hypothesis that CDS prices reveal negative information that firms intend to hide, resulting in timely adjustment of stock prices and reduction in the likelihood of future stock price crashes. We further show that the stock crash-reduction effect of CDS trading is stronger when corporate managers make more earnings forecasts or have more equity in their compensation packages. Our paper offers novel evidence on how financial innovations in the debt market improve the stability of the equity market

A light lunch will be provided at 1p.m. Please RSVP for catering purposes to Mala Kapahi by 12 noon on Monday, 18th September.

Date: Thursday, 21st September 2017

Time: 12.00 – 1.00 p.m.

Venue: University of Technology, Sydney           

Building 8, Room 5.001 Dr Chau Chak Wing Building

14 - 28 Ultimo Road, Ultimo

Coordinator: Adrian Lee (Ph: +61 2 9514 7765)

Enquiries: Mala Kapahi (Ph: +61 2 9514 7777)

Back to Finance seminars
Acknowledgement of Country

UTS acknowledges the Gadigal people of the Eora Nation, the Boorooberongal people of the Dharug Nation, the Bidiagal people and the Gamaygal people, upon whose ancestral lands our university stands. We would also like to pay respect to the Elders both past and present, acknowledging them as the traditional custodians of knowledge for these lands.