Working Paper: NBER ID: w29890
Authors: Bo Becker; Victoria Ivashina
Abstract: We show that over the past half century innovative disruptions were central to understanding corporate defaults. In a given year, industries experiencing abnormally high VC or IPO activity subsequently see higher default rates, higher segment exits by conglomerates, and higher yields on bonds issued by the firms in these industries. Overall, we find that disruption is a broad phenomenon, negatively affecting incumbent firms across the spectrum of age, valuation, and levers, with the exception of very large and low-leverage firms, which confirms our central hypothesis.
Keywords: No keywords provided
JEL Codes: G12; G30; G32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| VC activity (G24) | default risk (G33) |
| IPO activity (G24) | default risk (G33) |
| disruption (D59) | default risk (G33) |
| disruption (D59) | corporate defaults (G33) |
| high levels of VC activity (G24) | increased default rates among incumbent firms (G33) |
| disruption negatively affects firms (D21) | credit risk (G21) |