Firm Default and Aggregate Fluctuations

Tor Jacobson (), Rikard Kindell, Jesper Lindé and Kasper Roszbach ()

No 7083, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies the relation between macroeconomic fluctuations and corporate defaults while conditioning on industry affiliation and an extensive set of firm-specific factors. Using a multiperiod logit approach on a panel data set for all incorporated Swedish businesses over 1990-2002, we find strong evidence for a substantial and stable impact of aggregate fluctuations. Macroeffects differ across industries in an economically intuitive way. Out-of-sample evaluations show our approach is superior to both models that exclude macro information and best fitting naive forecasting models. While firm-specific factors are useful in ranking firms' relative riskiness, macroeconomic factors capture fluctuations in the absolute risk level.

Keywords: Business cycles; Default; Default-risk model; Logit model; Macroeconomic variables; Micro-data (search for similar items in EconPapers)
JEL-codes: C35 C41 C52 E44 G21 G33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-mac and nep-rmg
Date: Written
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Related works:
Working Paper: Firm Default and Aggregate Fluctuations (2008)
Working Paper: Firm default and aggregate fluctuations (2008)
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