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- Title
How Does the Use of Credit Default Swaps Affect Firm Risk and Value? Evidence from US Life and Property/Casualty Insurance Companies.
- Authors
Fung, Hung-Gay; Wen, Min-Ming; Zhang, Gaiyan
- Abstract
This study uses a unique credit default swap (CDS) transaction data set of insurers to examine the effects of CDS usage on the risk profile and firm value of US insurance companies for the period 2001-2009. Applying a Heckman two-stage model to adjust for the potential endogeneity of CDS usage with respect to firm risk and firm value, we find consistent evidence that the utilization of CDS for income generation purposes is associated with greater market risk, deterioration of financial performance, and lower firm value, for both Life and Property/Casualty insurers.
- Subjects
CREDIT default swaps; LIFE insurance; PROPERTY insurance companies; CASUALTY insurance companies; RISK assessment; FINANCIAL performance
- Publication
Financial Management (Wiley-Blackwell), 2012, Vol 41, Issue 4, p979
- ISSN
0046-3892
- Publication type
Article
- DOI
10.1111/j.1755-053X.2012.01203.x