Template-type: ReDIF-Paper 1.0
Author-Name: Ana-Maria Fuertes
Author-Email: a.fuertes@city.ac.uk
Author-Workplace-Name:  Cass Business School, City, University of London, ECIY.
Author-Name: Maria-Dolores Robles
Author-Email: mdrobles@ucm.es
Author-Workplace-Name: Universidad Complutense de Madrid (UCM).
Title: Bank Credit Risk Events and Peers’ Equity Value
Abstract: This paper documents a negative cross-transmission of bank-idiosyncratic credit risk events to the equity value of peers comprising other banks, insurance and real 
	estate firms inter alia. Large jumps in the idiosyncratic component of bank CDS spreads significantly reduce the equity value of peers, particularly on the event day. 
	The negative externality does not hinge on the “information connectedness” between the two entities as proxied by characteristics such as common core line of business, 
	common country or region, and inter-country common legal tradition. The negative externality is stronger in turmoil market conditions when risk-aversion levels are 
	higher and/or investors are subject to pessimism. The more fragile the risk profile of the event bank and peer firm prior to the event the stronger the 
	cross-transmission. The findings lend support to the wake-up call paradigm at micro level, and are insightful towards a better assessment of the vulnerability of the 
	financial system.
Classification-JEL: C13, C58, G14, G20.
Keywords: Credit Risk Events; Credit Default Swaps; Equity value; European banking; Cross-transmission; Wake-up Call.
Length: 62 pages 
Creation-Date: 2021-03
Number: 2021-06
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae2106.txt
File-URL: https://eprints.ucm.es/id/eprint/64890/1/2106.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:2106