Dinh Trung Nguyen , Thu Phuong Pham , Ngoc Anh Tran , Ralf Zurbruegg
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引用次数: 0
Abstract
This paper explores the dynamic effects of counterparty risk on stock liquidity using data on unsecured creditors after a debtor has declared bankruptcy. Through matched pair fixed effect panel regressions, we find that liquidity for unsecured creditors reduces after such declarations but only in the short term. This is evidenced by increases in various spread measures and Kyle's (1985) lambda and decreases in the bid depth differentials between the stocks of the unsecured creditors and the matched firms. Additionally, we find the greater the credit exposure, the greater the decline in liquidity. In the long term, debtor bankruptcies appear to have no effect on spread measures. Rather, the market depth for unsecured creditor stocks improves.
期刊介绍：
The Journal of Financial Stability provides an international forum for rigorous theoretical and empirical macro and micro economic and financial analysis of the causes, management, resolution and preventions of financial crises, including banking, securities market, payments and currency crises. The primary focus is on applied research that would be useful in affecting public policy with respect to financial stability. Thus, the Journal seeks to promote interaction among researchers, policy-makers and practitioners to identify potential risks to financial stability and develop means for preventing, mitigating or managing these risks both within and across countries.
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