Collateral Capacity and the Pricing of Corporate Leverage Risk: Evidence from CDS Markets
(2026) BUSN79 20261Department of Business Administration
- Abstract (Swedish)
- Seminar Date: 2026-06-04
Course: BUSN79, Degree Project in Accounting and Finance
Authors: Victor Damberg, Jonatan Svanbom
Advisor/Examiner: Diem Nguyen & Reda Moursli
Five key words: CDS Spreads, Leverage, Asset Tangibility, Financial Distress Risk, Redeployability
Purpose: To investigate whether asset tangibility weakens the positive association between leverage and market-implied financial distress risk.
Methodology: The empirical analysis uses panel regressions based on firm-level accounting and CDS data from S&P Capital IQ. The preferred specification applies firm and year fixed effects with one-year lagged explanatory variables. Additional analyses include pooled OLS, random effects, redeployability... (More) - Seminar Date: 2026-06-04
Course: BUSN79, Degree Project in Accounting and Finance
Authors: Victor Damberg, Jonatan Svanbom
Advisor/Examiner: Diem Nguyen & Reda Moursli
Five key words: CDS Spreads, Leverage, Asset Tangibility, Financial Distress Risk, Redeployability
Purpose: To investigate whether asset tangibility weakens the positive association between leverage and market-implied financial distress risk.
Methodology: The empirical analysis uses panel regressions based on firm-level accounting and CDS data from S&P Capital IQ. The preferred specification applies firm and year fixed effects with one-year lagged explanatory variables. Additional analyses include pooled OLS, random effects, redeployability extensions, propensity-score matching, and robustness tests using net leverage and Altman’s Z-score.
Theoretical perspectives: The theoretical framework consists of trade-off theory, structural credit-risk theory, collateral-channel arguments, and liquidation-value theory.
Empirical foundation: The sample consists of publicly listed firms in manufacturing-related sectors between 2015-2024. The final baseline sample includes 4,738 firm-year observations across 832 firms.
Conclusions: The study finds strong evidence that leverage is positively associated with CDS spreads, indicating that credit markets consistently price leverage as a source of financial distress risk. However, asset tangibility does not significantly weaken this relationship in the preferred fixed-effects specification, suggesting that broad accounting-based measures of tangibility may not fully capture the collateral channel reflected in CDS pricing. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/student-papers/record/9245708
- author
- Damberg, Victor LU and Svanbom, Jonatan LU
- supervisor
- organization
- course
- BUSN79 20261
- year
- 2026
- type
- H1 - Master's Degree (One Year)
- subject
- language
- English
- id
- 9245708
- date added to LUP
- 2026-07-01 12:32:24
- date last changed
- 2026-07-01 12:32:24
@misc{9245708,
abstract = {{Seminar Date: 2026-06-04
Course: BUSN79, Degree Project in Accounting and Finance
Authors: Victor Damberg, Jonatan Svanbom
Advisor/Examiner: Diem Nguyen & Reda Moursli
Five key words: CDS Spreads, Leverage, Asset Tangibility, Financial Distress Risk, Redeployability
Purpose: To investigate whether asset tangibility weakens the positive association between leverage and market-implied financial distress risk.
Methodology: The empirical analysis uses panel regressions based on firm-level accounting and CDS data from S&P Capital IQ. The preferred specification applies firm and year fixed effects with one-year lagged explanatory variables. Additional analyses include pooled OLS, random effects, redeployability extensions, propensity-score matching, and robustness tests using net leverage and Altman’s Z-score.
Theoretical perspectives: The theoretical framework consists of trade-off theory, structural credit-risk theory, collateral-channel arguments, and liquidation-value theory.
Empirical foundation: The sample consists of publicly listed firms in manufacturing-related sectors between 2015-2024. The final baseline sample includes 4,738 firm-year observations across 832 firms.
Conclusions: The study finds strong evidence that leverage is positively associated with CDS spreads, indicating that credit markets consistently price leverage as a source of financial distress risk. However, asset tangibility does not significantly weaken this relationship in the preferred fixed-effects specification, suggesting that broad accounting-based measures of tangibility may not fully capture the collateral channel reflected in CDS pricing.}},
author = {{Damberg, Victor and Svanbom, Jonatan}},
language = {{eng}},
note = {{Student Paper}},
title = {{Collateral Capacity and the Pricing of Corporate Leverage Risk: Evidence from CDS Markets}},
year = {{2026}},
}