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Firm Default And Aggregate Fluctuations

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  • Tor Jacobson
  • Jesper Lindé
  • Kasper Roszbach

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 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.

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File URL: http://hdl.handle.net/10.1111/jeea.2013.11.issue-4
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Article provided by European Economic Association in its journal Journal of the European Economic Association.

Volume (Year): 11 (2013)
Issue (Month): 4 (08)
Pages: 945-972

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Handle: RePEc:bla:jeurec:v:11:y:2013:i:4:p:945-972
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Find related papers by JEL classification:
  • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
  • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
  • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
  • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
  • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
  • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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