Credit risk: the role of market, accounting and macroeconomic information - evidence from US firms and a FAVAR model

Nicholas Apergis () and Sofia Eleftheriou ()

International Journal of Banking, Accounting and Finance, 2012, vol. 4, issue 4, 315-341

Abstract: This paper examines the role of accounting, market and macroeconomic information in explaining the cross-sectional variation of credit default swap spreads. The study proposes a panel FAVAR methodological approach to combine the additional predictions from a long list of accounting, market and macroeconomic fundamental variables. A comprehensive analysis based on 171 US manufacturing firms and spanning the period 2003-2011, shows that variance decompositions support the dominance of the market environment over the accounting and the macroeconomic environments in providing information to the credit markets.

Keywords: accounting information; market information; macroeconomic fundamentals; CDS spreads; panel FAVAR model; USA; United States; manufacturing firms; credit risk; cross-sectional variation; credit default swaps; credit markets. (search for similar items in EconPapers)
Date: 2012
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