Disruption and Credit Markets
59 Pages Posted: 13 Feb 2019 Last revised: 18 Mar 2022
Date Written: January 20, 2022
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: Disruption, Default, Corporate Bonds
JEL Classification: G12, G30, G32
Suggested Citation: Suggested Citation