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.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
