Edgardo Cayón

Professor finance, CESA Business School

Colombia

ecayon@cesa.edu.co

Determinants of credit default swap (CDS) spreads in Latin America: An empirical analysis of corporate debt in public and private companies

Juan Manuel Perilla

Colombia

jperilla@fidubogota.com

Abstract. In this article we have examined the effects of the common determinants of credit quality such as cash, debt, and tangibility on CDS spreads in Latin America. Our sample consists of 50 Latin American companies, while the period under consideration is between 2006 and 2016. Using the panel regression model in which we have controlled for year and company effects, we have found that certain proxies for cash, debt, and tangibility could explain the variation in CDS spreads in publicly traded companies, but not in the case of private companies that trade bonds at international markets. For private companies in Latin America, none of the common determinants for spreads were statistically significant. For public companies, we have found that the most statistically significant proxies for cash, debt, and tangibility explaining the variation in CDS spreads are retained earnings, total debt/total assets, inventories, and fixed assets. Our results show that in the case of private companies of Latin America, the common CDS spreads determinants found in literature do not help explaining the variation in spreads.

Received: July, 2018

1st Revision: September, 2018

Accepted: November, 2018

DOI: 10.14254/2071-8330.2018/11-4/4

JEL Classification: G3, G32

Keywords: Latin American bonds, corporate debt, determinants, panel regression, public companies, private companies