The Journal of Finance publishes leading research across all the major fields of finance. It is one of the most widely cited journals in academic finance, and in all of economics. Each of the six issues per year reaches over 8,000 academics, finance professionals, libraries, and government and financial institutions around the world. The journal is the official publication of The American Finance Association, the premier academic organization devoted to the study and promotion of knowledge about financial economics.
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Exodus from Sovereign Risk: Global Asset and Information Networks in the Pricing of Corporate Credit Risk
Published: 04/19/2016 | DOI: 10.1111/jofi.12412
JONGSUB LEE, ANDY NARANJO, STACE SIRMANS
Using five‐year credit default swap (CDS) spreads on 2,364 companies in 54 countries from 2004 to 2011, we find that firms exposed to stronger property rights through their foreign asset positions (institutional channel) and firms cross‐listed on exchanges with stricter disclosure requirements (informational channel) reduce their CDS spreads by 40 bps for a one‐standard‐deviation increase in their exposure to the two channels. These channels capture effects beyond those associated with firm‐ and country‐level fundamentals. Overall, we find that firm‐level global asset and information connections are important mechanisms to delink firms from their sovereign and country risks.