Capital Structure Information Transmission In Us Public Firms: Price Discovery Across Equity, Corporate Bond And Credit Default Swap Markets

Abstract

This evidence is used to argue in the equity, corporate bond, or credit default swap (CDS) markets that issuer information revelations propagate within such markets first; but finite-sample reliability critically hinges on co-integration-rank selection, contemporaneous innovation correlation pairs and asynchronous trading. We specify and reproduce a closed-form Monte Carlo envelope for a three-market rank-two Vec­tor error-correction model in which permanent-information shares are known. Core Analysis: All Supplemental Diagnostics + bootstrap coverage (500 systems, 499 resamples), unknown-break detection, event-study power calculation, and automated reproducibility audit. Rank two is chosen for each programmed leader in 68.8%–69.4% of samples across 500 replications. Dominant source of over-selection at the rank-three level: deterministic-term choice Conditional Hasbrouck leader accuracy 99.7%–100.0 Unconditional 68.8%–69.4 For example, 75% clustered staleness using refresh-time sampling achieves a bond-share bias reduction from −0.277 to −0.114 and extensively lower unconditional leader recovery (27.3%→51.5%) but reduces the effective number of observations to ~126." Percentile-bootstrap coverage reaches 92.4%–94.6%. The unknown-break detector finds twenty-six of these latent breaks (56.8%); however, leader accuracy at the conditional regime-level is > 97%. We end with a validation of a staged empirical framework: validate rankings, estimate lower and upper bounds for ordering, and finally test the synchronization-stabilization paths conditional on successful ordering (vs. quality identified based on the entire sample).

Through examining the joint price discovery process among corporate bonds and credit default swaps, we uncover additional dimensions of asynchronous trading that can be partially explained by the inherent properties of each asset