Aggregate implications of corporate bond holdings by nonfinancial firms

Arbeitspapier

This paper explores the impact of risky asset holdings by U.S. nonfinancial firms. From the early 1990s to 2017, the share of risky securities surged from 28% to over 40% of firms' financial assets. Using a business-cycle heterogeneous firms model, I show that declining real interest rates since the 1980s increased the risk premium, driving the increase in risky asset holdings. The model predicts that firms with higher exposure to risky assets experience an investment decline up to 50% more pronounced during large shocks, empirically validated by analyzing the Great Financial Crisis.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 967

Classification and Topics

• Classification: Wirtschaft ; Investment; Capital; Intangible Capital; Capacity ; Financial Markets and the Macroeconomy ; Portfolio Choice; Investment Decisions
• Subject: Risky assets ; corporate bonds ; firm heterogeneity ; firm dynamics ; business-cycle

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Ferreira, Miguel H.
• Event: Veröffentlichung
• (who): Queen Mary University of London, School of Economics and Finance
• (where): London
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/284317
• Last update: 10.03.2025, 11:43 AM CET