The determinants of bank CDS spreads: evidence from the financial crisis
Based on a sample of mid-tier and top-tier internationally active banks with 5-year senior CDS, this paper investigates the determinants of credit default swaps (CDS) spreads and whether CDS spreads can be considered a good proxy of bank performance. The analysis encompasses three time periods: a pre-crisis period (1 January 2005-30 June 2007), a crisis period (1 July 2007-31 March 2009) and a post-crisis period (1 April 2009-30 June 2011) and focuses exclusively on bank-specific balance sheet ratios. The results of the empirical analysis indicate that bank CDS spreads, both in the pre-crisis period, but especially in the crisis period, reflect the risk captured by bank balance sheet ratios. We find that the determinants of bank CDS spreads vary strongly across time, as economic and financial conditions vary. TIER 1 ratio and leverage appear insignificant in all of the three periods considered, while liquidity indicators become significant only during the crisis and post crisis period.
Year of publication: |
2013
|
---|---|
Authors: | Chiaramonte, Laura ; Casu, Barbara |
Published in: |
The European Journal of Finance. - Taylor & Francis Journals, ISSN 1351-847X. - Vol. 19.2013, 9, p. 861-887
|
Publisher: |
Taylor & Francis Journals |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
On the relationship between bank CDS spreads and balance sheet indicators of bank risk
Chiaramonte, Laura, (2011)
-
The impact of the new structural liquidity rules on the profitability of EU banks
Chiaramonte, Laura, (2013)
-
The determinants of bank CDS spreads : evidence from the financial crisis
Chiaramonte, Laura, (2013)
- More ...