CDS channels of influence on discretionary accruals

• Main Authors: CHENG, Hao, LIM, Kian Guan
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2022
• Subjects: credit default swaps; earnings quality; absolute abnormal earnings accruals; trade credit exposures; risk management; Corporate Finance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/7015; https://ink.library.smu.edu.sg/context/lkcsb_research/article/8014/viewcontent/CDS_ChannelsInfluence_sv.pdf
• Institution: Singapore Management University

Existing studies indicated that firm debt holders can use the credit default swap (CDS) market to hedge their credit risk, and thus they would reduce their monitoring of the firms, leading to largely distressed firms shirking and increasing positive abnormal earnings accruals. Besides providing insu...