Investor-driven corporate finance: Evidence from insurance markets

Arbeitspapier

I study the causal effect of bond investor demand on the financing and investment decisions of nonfinancial firms using granular data on the bond transactions of U.S. insurance companies. Liquidity inflows from insurance premiums combined with insurers' persistent investment preferences identify bond demand shifts, which raise bond prices and reduce firms' financing costs. In response, firms issue more bonds, especially when they have well-connected bond underwriters. The proceeds are used for investment rather than shareholder payouts, particularly by financially constrained firms. The results emphasize that bond investors significantly affect corporate financing and investment decisions through their price impact.

Object Details

• ISBN: 978-92-899-6079-3
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 2816

Classification and Topics

• Classification: Wirtschaft ; Asset Pricing; Trading Volume; Bond Interest Rates ; Insurance; Insurance Companies; Actuarial Studies ; Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
• Subject: nstitutional Investors ; Insurance ; Corporate Bonds ; Corporate Investment

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kubitza, Christian
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2023

Further information

• DOI: doi:10.2866/981589
• Handle: http://hdl.handle.net/10419/278580
• Last update: 10.03.2025, 11:41 AM CET