Institutional quality and sovereign credit default swap spreads
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AbstractWe examine how the quality of political, legal, and regulatory institutions impacts sovereign risk premia. An improvement in institutional quality significantly lowers a country's sovereign credit default swap (CDS) spread, even after controlling for domestic and global macroeconomic factors. The incremental effect of institutional quality may also be economically important in explaining the variations in the level of sovereign CDS spreads. The basic results are robust to alternative model specifications, samples, control variables, measures of institutional quality, estimation methods, and controls for endogeneity. Overall, the evidence suggests that institutional quality may play a significant role in explaining sovereign CDS spreads.
Acceptance Date07/12/2018
All Author(s) ListHuang W, Lin S, Yang J
Journal nameJournal of Futures Markets
Year2019
Month6
Volume Number39
Issue Number6
PublisherWiley: 24 months
Pages686 - 703
ISSN0270-7314
LanguagesEnglish-United Kingdom
Keywordscredit default swap, sovereign credit risk, sovereign credit rating
Web of Science Subject CategoriesBusiness, Finance;Business & Economics

Last updated on 2020-24-11 at 01:56