Abstract The credit default swap (CDS) Big Bang introduced 2 standard coupons for CDS trading. We exploit the setting of the 2 standard coupons as a natural experiment to quantify the components of the bid–ask spreads in over-the-counter markets. We find that a significant portion of the difference in the bid–ask spread between the 2 coupons is explained by the difference in funding costs. Furthermore, search intensity also explains the variation in the difference in bid–ask spread. The liquidity typically concentrates on one of the standard coupons and can suddenly switch to the other coupon. Using the sudden switch of the primary coupon, we provide further evidence to support the predictions of search-based liquidity models.

This paper examines how political connections shape media bias and contribute to regulatory noncompliance in China's capital markets. Using a large sample of news articles on publicly listed non-state-owned enterprises (non-SOEs), we find that politically connected firms receive significantly more favorable media coverage than their unconnected peers. A difference-in-differences analysis exploiting a regulatory shock—China's Rule 18 anti-corruption regulation—that forced politically connected directors to resign confirms the link between political ties and biased reporting. Around corporate scandals, politically connected firms face softer media scrutiny, weakening reputational penalties. Critically, we show that this media shielding effect increases the likelihood of repeated regulatory violations. These findings highlight the social costs of the “scandal-covering” role of political connections, which not only distort the information environment but also undermine regulatory deterrence and market discipline.