Abstract In this article we construct a liquidity measure for credit default swaps (CDS) and investigate the relation between the changes in CDS spreads and the determinants implied by structural models of default, including firm leverage, volatility, risk-free interest rate, and liquidity. Using a dummy-variable pooling regression and a Markov regime-switching model, we show strong evidence that these determinants, especially the liquidity determinant, are significant and time varying.