Cross-Listings and the Dynamics between Credit and Equity Returns

Authors: Patrick Augustin, Feng Jiao, Sergei Sarkissian, and Michael J. Schill

Publication: The Review of Financial Studies, Forthcoming

Abstract:

We study how listing in multiple markets affects the dynamics between firms’ credit default swap (CDS) and stock returns. We find that cross-listing increases (i) the sensitivity of CDS to stock returns; (ii) the integration of CDS with world equity and bond markets; and (iii) the statistical synchronicity of CDS and stock prices. Our results are stronger for firms with greater media attention, analyst and CDS coverage, Google search intensity, and for listings in familiar markets. We suggest that a firm’s presence in global equity markets comes with an improvement in the credit-equity integration through a reduction of informational frictions.