Information risk and credit contagion

Yi-Hou Huang*, Chiao Ming Cheng

*Corresponding author for this work

Research output: Contribution to journalArticle

5 Scopus citations

Abstract

This paper demonstrates a positive relationship between information risk and the credit contagion effect. We use abnormal changes in the Credit Default Swaps (CDS) spreads to measure the contagion effect, and the dispersion of analyst forecasts as a proxy for information risk. We find that firms with higher information risk suffer a greater contagion effect that occurs in advance to the credit default events. This finding is robust under controls of key firm-specific characteristics and general condition of stock and credit markets.

Original languageEnglish
Pages (from-to)116-123
Number of pages8
JournalFinance Research Letters
Volume10
Issue number3
DOIs
StatePublished - 1 Sep 2013

Keywords

  • Contagion effect
  • Credit Default Swaps
  • Information risk

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