IDEAS home Printed from https://ideas.repec.org/p/chf/rpseri/rp1650.html
   My bibliography  Save this paper

Foreign Acquisition and Credit Risk: Evidence from the U.S. CDS Market

Author

Listed:
  • Umit Yilmaz

    (Swiss Finance Institute and University of Lugano)

Abstract

This paper empirically analyses the effect of foreign block acquisitions on the U.S. target firms' credit risk as captured by their CDS. The involvement of foreign investors triggers a major increase, about 42 basis points, in the target firm's CDS. This effect is mostly pronounced for firms with majority control transactions, with acquirers from developed markets, and with diversifying deals. The findings are consistent with the asymmetric information hypothesis. Indeed, foreign block purchases are significantly associated with higher exposure to idiosyncratic stock volatility.

Suggested Citation

  • Umit Yilmaz, 2016. "Foreign Acquisition and Credit Risk: Evidence from the U.S. CDS Market," Swiss Finance Institute Research Paper Series 16-50, Swiss Finance Institute, revised Dec 2016.
    • Handle: RePEc:chf:rpseri:rp1650
    as

    Download full text from publisher

    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2785591
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Foreign block acquisitions; Credit risk; CDS spreads; Stock volatility;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:chf:rpseri:rp1650. 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: Ridima Mittal (email available below). General contact details of provider: https://edirc.repec.org/data/fameech.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.