Firm Default and Aggregate Fluctuations
45 Pages Posted: 16 Feb 2009
There are 5 versions of this paper
Firm Default and Aggregate Fluctuations
Firm Default and Aggregate Fluctuations
Firm Default and Aggregate Fluctuations
Firm Default and Aggregate Fluctuations
Firm Default and Aggregate Fluctuations
Date Written: February, 16 2009
Abstract
This paper studies the relation between macroeconomic fluctuations and corporate defaults while conditioning on industry affiliation and an extensive set of firm-specific factors. Using a multiperiod logit approach on a panel data set for all incorporated Swedish businesses over 1990-2002, we find strong evidence for a substantial and stable impact of aggregate fluctuations. Macroeffects differ across industries in an economically intuitive way. Out-of sample evaluations show our approach is superior to both models that exclude macro information and best fitting naive forecasting models. While firm-specific factors are useful in ranking firms' relative riskiness, macroeconomic factors capture fluctuations in the absolute risk level.
Keywords: business cycles, default, default-risk model, logit model, macroeconomic variables and micro-data
JEL Classification: C35, C41, C52, E44, G21 and G33
Suggested Citation: Suggested Citation
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