Firm Default and Aggregate Fluctuations

Tor Jacobson (), Rikard Kindell (), Jesper Lindé and Kasper Roszbach ()
Additional contact information
Rikard Kindell: Svenska Handelsbanken, Postal: 106 70 Stockholm

No 226, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

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 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: Default; default-risk model; business cycles; aggregate fluctuations; microdata; logit; firm-specific variables; macroeconomic variables (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-ban, nep-bec, nep-mac and nep-rmg
Date: 2008-09-01

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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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Persistent link: http://EconPapers.repec.org/RePEc:hhs:rbnkwp:0226

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