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Disclosure, banks CDS spreads and the European sovereign crisis

Listed author(s):
  • Herve Alexandre

    ()

    (CEREG - Centre de Recherche sur la gestion et la Finance - DRM UMR 7088 - Université Paris-Dauphine)

  • François Guillemin

    (CRESE - Centre de REcherches sur les Stratégies Economiques - UFC - UBFC - Université Bourgogne Franche-Comté - UFC - Université de Franche-Comté, LCE - Laboratoire Chrono-environnement - UBFC - Université Bourgogne Franche-Comté - CNRS - Centre National de la Recherche Scientifique - UFC - Université de Franche-Comté)

  • Catherine Refait-Alexandre

    ()

    (LCE - Laboratoire Chrono-environnement - UBFC - Université Bourgogne Franche-Comté - CNRS - Centre National de la Recherche Scientifique - UFC - Université de Franche-Comté, CRESE - Centre de REcherches sur les Stratégies Economiques - UFC - UBFC - Université Bourgogne Franche-Comté - UFC - Université de Franche-Comté)

We investigate the impact of banks disclosure on the evolution of their CDS spreads during the European sovereign crisis. The disclosure of information helps investors in building expectations; disclosure may participate into the reduction of the information risk premium and may lead to a decrease of CDS spreads. We analyze the CDS spreads changes following the announcement of sovereign credit rating downgrades. We consider 16 dates in the period 2011-2013 and, for each one, we assess the cumulative abnormal CDS spread change (CASC). We build two disclosure indexes: one general and one specifically dedicated to sovereign exposure. We show that the bank exposure to sovereign risk has a positive impact on the CASC. Disclosure about sovereign exposure has a negative impact on CASC showing that information reduce risk premiums. However, the global disclosure increases the CASC; investors may disapprove the disclosure of too much abundant and broad information.

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Paper provided by HAL in its series Working Papers with number hal-01376916.

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Date of creation: 01 Sep 2015
Handle: RePEc:hal:wpaper:hal-01376916
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  22. repec:cii:cepiei:2011-q4-128-1 is not listed on IDEAS
  23. repec:cii:cepiei:2011-q4-128 is not listed on IDEAS
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