We rely on the theoretical prediction that financial misreporting peaks before economic busts to examine whether aggregate ex ante measures of the likelihood of financial misreporting improve the predictability of U.S. recessions. We consider six measures of misreporting and show that the...

Firm cyclicality decreases by around 40% after the inception of credit default swap (CDS) trading. The effect is due to CDS firms’ lower asset growth-GDP growth sensitivity in good times and stronger for firms facing a more severe exacting creditor problem. The cyclicality-reducing effect of...