We examine the effect of credit default swaps (CDSs) on debt specialization. We argue that reference firms in CDS contracts, seeking to minimize creditor conflicts and bankruptcy costs, exhibit higher debt concentration than firms on which no CDSs are traded. Our results show that firms engage in greater debt specialization and are more likely to specialize following the inception of CDS trading. Additionally, we find that, while lender concentration in firms increases, the number of bank lenders drops, lead arranger share rises, and the probability that lead arrangers and lenders are repeated increases following the onset of CDS trading. Our results are robust to instrumental variable estimation, propensity-score matching, different model specifications, and different subsamples.

This paper examines how bank regulation and supervision measures affect the synchronicity of bank stock returns, a measure that is negatively related to variations in bank-specific fundamentals and stock price informativeness. Using data from World Bank surveys in 35 countries, we find that bank stock returns are less synchronous in countries with more stringent capital regulations, more supervision that emphasizes private monitoring, and less government bank ownership. On the other hand, direct government control of bank activities, as well as direct government monitoring and disciplining, do not reduce stock return synchronicity.