Percorrer por autor "Paiva, Maria Alexandra Domingos"
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- Credit Default Swaps as predictors of financial distress : an evidence from european banksPublication . Paiva, Maria Alexandra Domingos; Reis, Ricardo César Ribeiro Ventura FerreiraBased on a sample of European banks with 5-year senior Credit Default Swaps (CDS) actively traded, this dissertation aims to analyze the reliability and the power of this market-based variable to predict financial distress. To include all significant episodes of bank distress over the past years, we develop a broad indicator that includes information regarding activity suspension, nationalizations, recapitalizations, mergers in distress, defaults on debt payments and government interventions. The time span of the analysis is from 2004 to 2017, including three sub-periods: pre-crisis (2004-2006), crisis (2007-2012) and post-crisis (2013-2017). We did not find in our data sample any financial distress event on the pre-crisis period, according to our definition, leading us to focus on the overall and crisis period. The results obtained were in line with expectations, suggesting that, for both periods considered, CDS spreads outperform any of the control variables included in the model, namely accounting metrics from the CAMEL system. Furthermore, we extended our research to assess whether accounting metrics determine the changes in CDS spreads, finding evidence that capital and earnings metrics are the ones significantly influencing CDS spreads for both periods. Lastly, when adding another market-based variable in the model, the Share Price, as potential predictor of bank' financial distress, we found that CDS spreads remain the most accurate predictor, despite finding evidence that both market variables are effective in anticipating financial distress