PT  - JOURNAL ARTICLE
AU  - Isakin, Maksim
AU  - Pu, Xiaoling
TI  - Practical Applications of The Impact of Firm-Level Political Risk on Creditor Control
AID  - 10.3905/pa.7.4.370
DP  - 2020 Apr 30
TA  - Practical Applications
PG  - 1--4
VI  - 7
IP  - 4
4099  - http://pa.pm-research.com/content/7/4/1.9.short
4100  - http://pa.pm-research.com/content/7/4/1.9.full
AB  - In The Impact of Firm-Level Political Risk on Creditor Control, from the Summer 2019 issue of The Journal of Fixed Income, authors Maksim Isakin (Cleveland State University) and Xiaoling Pu (Kent State University) examine the impact of firm-level political risk on the value of creditor control. This control is measured as the difference between the yield spread on a firm’s bonds (which have control rights) and the premium on corresponding credit default swaps (which do not have control rights). They find that the value of creditor control increases as the firm-level political risk increases, especially among firms with investment-grade ratings, large size, low leverage, or low equity volatility. They observe that this effect appears to be more pronounced among firms experiencing financial constraints or industry shocks. They also find that during periods of great partisan conflicts, the impact of firm-level political risk on the value of creditor control decreases.TOPICS: Fixed income and structured finance, credit default swaps, credit risk management, information providers/credit ratings