IDEAS home Printed from https://ideas.repec.org/a/bla/finmgt/v55y2026i2p251-274.html

Sovereign Credit Default Swaps and Corporate Investment

Author

Listed:
  • Hsien‐Yi Chen
  • Sheng‐Syan Chen
  • Feng‐Tse Tsai
  • Ya‐Wen Chen

Abstract

We investigate the impact of sovereign credit default swap (CDS) introduction on corporate investment. Our analysis reveals that the launch of sovereign CDS significantly expands national credit supply and boosts aggregate investment levels. We further document a positive and statistically significant effect of sovereign CDS introduction on firm‐level investment. Crucially, we find that this positive relationship is primarily observed in the subsample of firms without existing CDS trading and is more pronounced for politically sensitive firms. This beneficial effect is driven by the supply of domestic private credit and is amplified in countries characterized by weaker legal environments and lower information transparency. Collectively, our findings suggest that sovereign credit market innovation plays a vital role in channeling firms toward productive investments.

Suggested Citation

  • Hsien‐Yi Chen & Sheng‐Syan Chen & Feng‐Tse Tsai & Ya‐Wen Chen, 2026. "Sovereign Credit Default Swaps and Corporate Investment," Financial Management, Financial Management Association International, vol. 55(2), pages 251-274, June.
    • Handle: RePEc:bla:finmgt:v:55:y:2026:i:2:p:251-274
    DOI: 10.1111/fima.70004
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/fima.70004
    Download Restriction: no
    File URL: https://libkey.io/10.1111/fima.70004?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:finmgt:v:55:y:2026:i:2:p:251-274. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/fmaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.