This study finds that credit default swap (CDS) trading positively affects a firm's environmental, social, and governance (ESG) performance. This effect is more prominent in ESG strengths than ESG concerns. The proposed empirical connection remains valid across endogeneity-controlling methodologies, model specifications, and ESG performance measures. The effect is stronger for firms with stronger bank relationships, higher debt dependence, and more restrictive covenants. Furthermore, improvement in ESG performance is more pronounced for firms with more free cash flow, lower institutional ownership, and higher financial constraints. Our findings reveal the real effects of CDS trading on firm ESG performance.

The salience theory of choice under risk shows that investor behavior drives cross-sectional cryptocurrency returns. Investors place too much weight on salient payouts, causing overvaluation of cryptocurrencies with upward salience returns and undervaluation of those with downward salience returns, leading to negative expected returns for the former and positive expected returns for the latter. The salience effect in the cryptocurrency market is more pronounced than in equity markets, making it a significant risk factor for explaining other cross-sectional returns in the cryptocurrency market. Unlike other documented return predictors, the salience theory uniquely contributes to understanding the cryptocurrency market.

There have been 128 defaults among U.S. CDS reference entities between 2001 and 2020. Within this sample, the five-year CDS spread is a significant predictor of corporate default in models with equity market covariates and firm attributes. This finding holds for forecast horizons up to 12 months, among financial and non-financial firms, within and without the great financial crisis, and is robust to the inclusion of corporate bond and equity options market information. A decomposition of the CDS spread into liquidity, physical default, and risk premium components shows that most of its predictive power for corporate default comes from the physical default component, both in- and out-of-sample. These results confirm the relevance of information contained in single-name CDS pricing to corporate default prediction.