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SUMMARY:The Value of Creditor Control in Corporate Bonds
DTSTART:20141121T103000
DTEND:20141121T120000
DTSTAMP:20260502T223052Z
UID:5e568a9e688a9deae3cb51c012f5be60cd1a8683879b406068ced1f3
CATEGORIES:Conferences - Seminars
DESCRIPTION:Oguzhan KARAKAS (Carroll School of Management\, Boston College
 )\nThis paper analyzes the impact on corporate bond pricing of the shift o
 f control rights from shareholders to creditors as firm credit quality dec
 lines. Specifically\, we propose a new measure to demonstrate the premium 
 in bond prices that is related to creditor control. The main insight for o
 ur methodology is that credit default swap (CDS) prices reflect the cash f
 lows of the underlying bonds\, but not the control rights. We estimate the
  premium in bond prices as the difference in the bond price and an equival
 ent synthetic bond without control rights that is constructed using CDS co
 ntracts. Empirically\, we find this premium increases as firm credit quali
 ty decreases and around important credit events such as defaults\, bankrup
 tcies\, and covenant violations\; the increase is greatest for bonds most 
 pivotal to changes in control. Changes in bond and CDS liquidity do not ap
 pear to drive increases in the premium.
LOCATION:UNIL\, Extranef\, room 126 https://planete.unil.ch/plan/?local=EX
 T-126
STATUS:CONFIRMED
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