Creditor-Control Rights and the Nonsynchronicity of Global CDS Markets

Iftekhar Hasan, Miriam Marra, Eliza Wu and Gaiyan Zhang

The Review of Corporate Finance Studies, 2025, vol. 14, issue 1, 204-260

Abstract: We analyze how creditor rights affect the nonsynchronicity of global corporate credit default swap spreads (CDS-NS). CDS-NS is negatively related to the country-level creditor-control rights, especially to the “restrictions on reorganization” component, where creditor-shareholder conflicts are high. The effect is concentrated in firms with high investment intensity, asset growth, information opacity, and risk. Pro-creditor bankruptcy reforms led to a decline in CDS-NS, indicating lower firm-specific idiosyncratic information being priced in credit markets. A strategic-disclosure incentive among debtors avoiding creditor intervention seems more dominant than the disciplining effect, suggesting how strengthening creditor rights affects power rebalancing between creditors and shareholders. (JEL G14, G15, G33, G34)

Date: 2025
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