It's not time to make a change: Sovereign fragility and the corporate credit risk

Fabio Fornari and Andrea Zaghini

No 652, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: Relying on a perspective borrowed from monetary policy announcements and introducing an econometric twist in the traditional event study analysis, we doc- ument the existence of an "event risk transfer", namely a significant credit risk transmission from the sovereign to the corporate sector after a sovereign rating downgrade. We find that after the delivery of the downgrade, corporate CDS spreads rise by 36% per annum and there is a widespread contagion across coun- tries, in particular among those which were most exposed to the sovereign debt crisis. This effect exists on top of the standard relation between sovereign and corporate credit risk.

Keywords: sovereign rating; corporate credit risk; CDS spreads (search for similar items in EconPapers)
JEL-codes: G15 G32 G38 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cfn, nep-fmk and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/231292/1/1748279610.pdf (application/pdf)

Related works:
Journal Article: It’s not time to make a change: Sovereign fragility and the corporate credit risk (2022)
Working Paper: It’s not time to make a change: sovereign fragility and the corporate credit risk (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:652

Access Statistics for this paper

More papers in CFS Working Paper Series from Center for Financial Studies (CFS) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().