Investor-driven corporate finance: Evidence from insurance markets

Christian Kubitza

No 43/21, ICIR Working Paper Series from Goethe University Frankfurt, International Center for Insurance Regulation (ICIR)

Abstract: This paper documents that the bond investments of insurance companies transmit shocks from insurance markets to the real economy. Liquidity windfalls from household insurance purchases increase insurers' demand for corporate bonds. Exploiting the fact that insurers persistently invest in a small subset of firms for identification, I show that these increases in bond demand raise bond prices and lower firms' funding costs. In response, firms issue more bonds, especially when their bond underwriters are well connected with investors. Firms use the proceeds to raise investment rather than equity payouts. The results emphasize the significant impact of investor demand on firms' financing and investment activities.

Keywords: Corporate Finance; Corporate Bonds; Insurance; Real Effects (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-cfn, nep-fdg, nep-ias and nep-isf
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Investor-driven corporate finance: evidence from insurance markets (2023)
Working Paper: Investor-Driven Corporate Finance: Evidence from Insurance Markets (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:icirwp:4321

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