Skip navigation

Do country-level financial structures explain bank-level CDS spreads?

Do country-level financial structures explain bank-level CDS spreads?

Benbouzid, Nadia, Mallick, Sushanta K. and Sousa, Ricardo M. (2017) Do country-level financial structures explain bank-level CDS spreads? Journal of International Financial Markets, Institutions and Money, 48. pp. 135-145. ISSN 1042-4431 (doi:10.1016/j.intfin.2017.01.002)

[img] PDF (Author Accepted Manuscript)
16405 BENBOUZID_Country-level_Financial_Structures_2017.pdf - Accepted Version
Restricted to Registered users only until 17 January 2019.

Download (718kB)

Abstract

The existing literature has typically focused on bank-level characteristics to uncover the main drivers of bank CDS spreads. In this paper, we use data for 58 banks from 15 countries over the period 2004–2011 to assess whether country-level factors also explain variations in bank CDS spreads. In particular, we focus on financial structure indicators (namely, financial stability, depth, access and efficiency) and country risks (i.e. economic, financial and political rating risks) to explain why some banks experience higher levels of credit risk relative to others across countries. We find that while country-level financial instability is associated with higher credit risk; bank-level profitability, liquidity and improved asset quality are linked with lower credit risk. In addition, although country-level financial depth (as an indicator of credit bubble) contributes to higher CDS spreads, house price appreciation tends to dampen credit risk.

Item Type: Article
Uncontrolled Keywords: Bank CDS spreads; Financial structures; Bank characteristics
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of Accounting & Finance
Last Modified: 18 Apr 2018 19:31
Selected for GREAT 2016: None
Selected for GREAT 2017: GREAT b
Selected for GREAT 2018: GREAT c
URI: http://gala.gre.ac.uk/id/eprint/16405

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics