Disruption and Credit Markets

Bo Becker and Victoria Ivashina

No 13508, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In the past thirty years, defaults on corporate bonds have been substantially higher than the historical average. We show that this increase in credit risk can be largely attributed to an increase in the rate at which new and fast-growing firms displace incumbents (a phenomenon sometimes referred to as ‘disruptive innovation’). Industries with a lager presence of firms newly listed on the stock market, as well as industries that receive funding from venture capital, have a higher loss of revenue market share for established firms and subsequently see a rise in corporate bond defaults. Patent filings by individuals as opposed to corporations also predict defaults. These results are not affected by inclusion of controls for industry exposure to offshore manufacturing.

Keywords: Disruption; Default; Corporate bonds (search for similar items in EconPapers)
JEL-codes: G12 G30 G32 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-cfn
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Related works:
Journal Article: Disruption and Credit Markets (2023)
Working Paper: Disruption and Credit Markets (2022)
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