We document that cost stickiness is priced in the CDS market. More specifically, we show that creditors require higher risk premiums for sticky firms consistent with stickiness increasing asset volatility. In addition, we find that creditors require lower or no risk premiums if stickiness is...

Using a large sample of U.S. firms, we provide evidence on the interplay between CEO overconfidence and CFO overconfidence on cost behavior in the setting of cost stickiness. We predict that overconfident CEOs or CFOs overestimate future demand, which makes them more likely to keep excess...

We propose managerial overconfidence as a behavioral explanation for SG&A cost stickiness. Building on the psychology literature, we predict that overconfident managers are more likely to overestimate future demand and therefore less likely to cut SG&A costs when sales decline. Using a sample of...

In this paper we show that informational and real frictions in CDS markets strongly affect CDS premia. We derive this main finding using a proprietary set of individual CDS transactions cleared by the Depository Trust & Clearing Corporation. We first show that CDS traders adjust the CDS premium...

Based on individual CDS transactions cleared by the Depository Trust & Clearing Corporation, we show that illiquidity strongly affects credit default swap premiums. We identify the following effects: First, transaction direction affects prices, as buy (sell) orders lead to premium increases...