Corporate Leverage, Debt Maturity, and Credit Supply: The Role of Credit Default Swaps

Alessio Saretto and Heather E. Tookes

The Review of Financial Studies, 2013, vol. 26, issue 5, 1190-1247

Abstract: Does the ability of suppliers of corporate debt capital to hedge risk through credit default swap (CDS) contracts impact firms' capital structures? We find that firms with traded CDS contracts on their debt are able to maintain higher leverage ratios and longer debt maturities. This is especially true during periods in which credit constraints become binding, as would be expected if the ability to hedge helps alleviate frictions on the supply side of credit markets. The Author 2013. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oup.com., Oxford University Press.

Date: 2013
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