Identifying Empty Creditors with a Shock and Microdata

83 Pages Posted: 11 Feb 2020 Last revised: 30 Sep 2022

See all articles by Hans Degryse

Hans Degryse

KU Leuven - Faculty of Business and Economics (FEB)

Yalin Gündüz

Deutsche Bundesbank

Kuchulain O'Flynn

University of Zurich - Department Finance; Swiss Finance Institute

Steven Ongena

University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: January 17, 2020

Abstract

Credit default swaps on firm debt enable creditors to hedge against default, disincentivizing them to participate in firm restructuring. This "empty creditor" effect was neutralized by a change in the bankruptcy code in 2012 in Germany, a country with microdata matching bank-firm CDS net notional with credit exposures. After the change the probability of default of CDS firms declines, more when creditors are more hedged or debt is concentrated, less when credit relationships are longer, debt more collateralized, or firms financially safer. Recognition of change is stronger for capital unconstrained, liquidity constrained banks that monitor less or earn less interest.

Keywords: Empty creditors, default, bankruptcy, credit default swaps, microdata

JEL Classification: G21, G33, G38

Suggested Citation

Degryse, Hans and Gündüz, Yalin and O'Flynn, Kuchulain and Ongena, Steven R. G., Identifying Empty Creditors with a Shock and Microdata (January 17, 2020). Swiss Finance Institute Research Paper No. 20-15, Available at SSRN: https://ssrn.com/abstract=3521390 or http://dx.doi.org/10.2139/ssrn.3521390

Hans Degryse

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Yalin Gündüz

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Kuchulain O'Flynn (Contact Author)

University of Zurich - Department Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Steven R. G. Ongena

University of Zurich - Department Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

NTNU Business School ( email )

Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
171
Abstract Views
1,507
Rank
276,074
PlumX Metrics