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In Safe Hands: The Financial and Real Impact of Investor Composition over the Credit Cycle

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  • Antonio Coppola

Abstract

I show that investor composition affects bond price dynamics and capital allocation during crises. Using large-scale holdings data and within-firm ownership variation across near-identical bonds, I causally identify bond returns’ investor composition elasticities. Corporate bonds held predominantly by insurers rather than mutual funds suffer milder losses in downturns: increasing insurer holdings by half a bond’s size causes 20% shallower drawdowns. A shift-share instrument isolates variation from large insurers’ idiosyncratic primary-market allocations. Differences in intermediaries’ liability structures drive these results, which hold across countries. During crises, firms with more stable bondholders maintain higher borrowing at lower cost and invest more.

Suggested Citation

  • Antonio Coppola, 2025. "In Safe Hands: The Financial and Real Impact of Investor Composition over the Credit Cycle," The Review of Financial Studies, Society for Financial Studies, vol. 38(8), pages 2275-2325.
    • Handle: RePEc:oup:rfinst:v:38:y:2025:i:8:p:2275-2325.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhaf017
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    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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