It's not time to make a change: Sovereign fragility and the corporate credit risk

Arbeitspapier

Relying on a perspective borrowed from monetary policy announcements and introducing an econometric twist in the traditional event study analysis, we doc- ument the existence of an "event risk transfer", namely a significant credit risk transmission from the sovereign to the corporate sector after a sovereign rating downgrade. We find that after the delivery of the downgrade, corporate CDS spreads rise by 36% per annum and there is a widespread contagion across coun- tries, in particular among those which were most exposed to the sovereign debt crisis. This effect exists on top of the standard relation between sovereign and corporate credit risk.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CFS Working Paper Series ; No. 652

Classification and Topics

• Classification: Wirtschaft ; International Financial Markets ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Corporate Finance and Governance: Government Policy and Regulation
• Subject: sovereign rating ; corporate credit risk ; CDS spreads

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Fornari, Fabio ; Zaghini, Andrea
• Event: Veröffentlichung
• (who): Goethe University Frankfurt, Center for Financial Studies (CFS)
• (where): Frankfurt a. M.
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/231292
• URN: urn:nbn:de:hebis:30:3-573904
• Last update: 10.03.2025, 11:44 AM CET