RT Journal Article
SR Electronic
T1 The Impact of Firm-Level Political Risk on Creditor Control
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP jfi.2019.1.070
DO 10.3905/jfi.2019.1.070
A1 Maksim Isakin
A1 Xiaoling Pu
YR 2019
UL https://pm-research.com/content/early/2019/05/22/jfi.2019.1.070.abstract
AB This article examines the impact of firm-level political risk on the value of creditor control, which is measured as the premium difference in the bond price and an equivalent synthetic bond without control rights. The synthetic bond is constructed from the credit default swap (CDS) contract. We find empirically that the value of creditor control increases as the firm-level political risk increases, especially among firms with investment-grade ratings, large size, low leverage, or low equity volatility. This effect appears to be more pronounced among firms experiencing financial constraints or industry shocks. During periods of great partisan conflicts, the impact of firm-level political risk on the value of creditor control decreases.TOPICS: Fixed income and structured finance, credit default swaps, credit risk management, information providers/credit ratings