Title: Credit risk: the role of market, accounting and macroeconomic information - evidence from US firms and a FAVAR model

Authors: Nicholas Apergis; Sofia Eleftheriou

Addresses: Department of Banking and Financial Management, University of Piraeus, 80 Karaoli and Dimitriou, 18534 Piraeus, Greece ' Department of Business Administration, University of Piraeus, 80 Karaoli and Dimitriou, 18534 Piraeus, Greece

Abstract: This paper examines the role of accounting, market and macroeconomic information in explaining the cross-sectional variation of credit default swap spreads. The study proposes a panel FAVAR methodological approach to combine the additional predictions from a long list of accounting, market and macroeconomic fundamental variables. A comprehensive analysis based on 171 US manufacturing firms and spanning the period 2003-2011, shows that variance decompositions support the dominance of the market environment over the accounting and the macroeconomic environments in providing information to the credit markets.

Keywords: accounting information; market information; macroeconomic fundamentals; CDS spreads; panel FAVAR model; USA; United States; manufacturing firms; credit risk; cross-sectional variation; credit default swaps; credit markets.

DOI: 10.1504/IJBAAF.2012.053344

International Journal of Banking, Accounting and Finance, 2012 Vol.4 No.4, pp.315 - 341

Received: 03 Mar 2012
Accepted: 15 Feb 2013
Published online: 23 Aug 2014 *

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