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Foreign Acquisition and Credit Risk: Evidence from the U.S. CDS Market

Published online by Cambridge University Press:  17 January 2022

Umit Yilmaz*
Ozyegin University Faculty of Business
* (corresponding author)
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This article empirically analyzes the effect of foreign block acquisitions on U.S. target firms’ credit risk as measured by their credit default swap (CDS) spreads. Foreign block purchases lead to a greater increase in the target firms’ CDS premia post-acquisition compared to domestic block purchases. This effect is stronger when foreign owners are geographically and culturally more distant, and when they obtain majority control. The findings are consistent with an asymmetric information hypothesis, in which foreign owners are less effective monitors due to information barriers.

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This is an Open Access article, distributed under the terms of the Creative Commons Attribution licence (, which permits unrestricted re-use, distribution and reproduction, provided the original article is properly cited.
© The Author(s), 2022. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington


I am indebted to my advisor, Alberto Plazzi, for his guidance. I thank an anonymous referee, Isil Erel, Rüdiger Fahlenbrach, Francesco Franzoni, Laurent Frésard, Levent Güntay, Gerard Hoberg, Oğuzhan Karakaş, Christoph Schneider, Jovan Stojkovic, René Stulz, Fabio Trojani, and Guner Velioglu for insightful discussions and comments. I would like to acknowledge comments from seminar participants at the Annual Swiss Doctoral Workshop, SFI Finance Workshop, 2017 European Retail Investment Conference (ERIC) Doctoral Consortium, 2017 Finance Forum, 2017 Conference on Credit Analysis and Risk Management, 2017 Annual Meeting of the German Finance Association, 2018 Annual Conference of the Swiss Society for Financial Market Research, and The Ohio State University. The article was partly completed while I was visiting the Fisher College of Business at The Ohio State University, whose hospitality is gratefully acknowledged. All errors are my own.


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