Aggregate Implications of Corporate Bond Holdings by Nonfinancial Firms

Miguel H. Ferreira
Additional contact information
Miguel H. Ferreira: Queen Mary University of London, School of Economics and Finance

No 967, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: This paper explores the impact of risky asset holdings by U.S. nonfinancial firms. From the early 1990s to 2017, the share of risky securities surged from 28% to over 40% of firms’ financial assets. Using a business-cycle heterogeneous firms model, I show that declining real interest rates since the 1980s increased the risk premium, driving the increase in risky asset holdings. The model predicts that firms with higher exposure to risky assets experience an investment decline up to 50% more pronounced during large shocks, empirically validated by analyzing the Great Financial Crisis.

Keywords: Risky assets; corporate bonds; firm heterogeneity; firm dynamics; business-cycle (search for similar items in EconPapers)
JEL-codes: E22 E44 G11 (search for similar items in EconPapers)
Date: 2023-09-29
New Economics Papers: this item is included in nep-dge and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.qmul.ac.uk/sef/media/econ/research/workingpapers/wp967.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:967

Access Statistics for this paper

More papers in Working Papers from Queen Mary University of London, School of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Nicholas Owen ( this e-mail address is bad, please contact ).