Determinants of Credit Default Swaps: A Panel Regression Approach

• Main Authors: Yi-Chun Chou, 周怡君
• Other Authors: AlexYiHouHuang
• Format: Others
• Language: en_US
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/58126025078644776648

碩士 === 元智大學 === 商學碩士班(財務金融學程) === 97 === The key purpose of this research is to observe the determinants of CDS spreads with a large balanced panel data. Many prior researches have devoted on this topic, however this research differ from them in two major aspects. First, a complete balance panel data is utilized containing 197 companies and more than 1000 daily data from 2003 to 2006. Second and more importantly, a comprehensive list of variables is accounted including theoretical variables, stock market info, industries, bond yield-spreads, macro-financial variables, accounting items, and credit rating. Our finding is similar to previous papers, we find the variables which are implied by structure model and credit rating plays an important role on the determinants of CDS. The explanatory power of bond yield-spreads is also great, after taking it into POLS regression, adjusted R-square increase 13%. In the FE approach, after taking all above variables into the model, we observe that the R-square can reach nearly 84% in the whole sample; in the subsamples, the R-square of the lowest credit rating firms reaches about 90%, and The R-square of FIRE industry even reaches approximately 93%. Moreover, consistent with previous research, the explanatory power of credit rating for low credit rating firms is greater than high credit rating firms. Our results suggest that not only the credit rating, the low credit firms is more sensitive to bond yield-spreads and leverage than high credit firms as well. Further, we adopt the RESET approach and detect that the nonlinear relationship exists between CDS spreads and stock return/bond yield-spreads.