Working Paper Series, Department of Finance, Copenhagen Business School
Claus Bajlum and Peter Tind Larsen
Accounting Transparency and the Term Structure of Credit Default Swap Spreads
Abstract: This paper estimates the impact of accounting transparency
on the term structure of CDS spreads for a large cross-section of rms.
Using a newly developed measure of accounting transparency in Berger, Chen
& Li (2006), we nd a downward-sloping term structure of transparency
spreads. Estimating the gap between the high and low transparency credit
curves at the 1, 3, 5, 7 and 10-year maturity, the transparency spread is
insigni cant in the long end but highly signi cant and robust at 20 bps at
the 1-year maturity. Furthermore, the eect of accounting transparency on
the term structure of CDS spreads is largest for the most risky rms. These
results are strongly supportive of the model by Du¢ e & Lando (2001), and
add an explanation to the underprediction of short-term credit spreads by
traditional structural credit risk models.
Keywords: na; (follow links to similar papers)
JEL-Codes: E43; G13; (follow links to similar papers)
58 pages, January 1, 2007
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
Questions (including download problems) about the papers in this series should be directed to Lars Nondal ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom