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Bonds at a premium: the impact of insurers on corporate bond issuers

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  • Kubitza, Christian

Abstract

On the basis of insurance companies’ bond investments, I examine how shifts in investors’ demand for corporate bonds affect non-financial bond issuers. When demand for their bonds increases, firms’ financing costs decrease, which encourages them to increase their bond debt and invest more. These effects crucially depend on how credit-constrained firms are. My findings emphasise the critical role that institutional investors play in shaping non-financial firms’ financing decisions and real economic activity. JEL Classification: G12, G22, G23, G3, G32

Suggested Citation

  • Kubitza, Christian, 2023. "Bonds at a premium: the impact of insurers on corporate bond issuers," Research Bulletin, European Central Bank, vol. 110.
    • Handle: RePEc:ecb:ecbrbu:2023:0110:
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    References listed on IDEAS

    as
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    3. Bolton, Patrick & Scharfstein, David S, 1996. "Optimal Debt Structure and the Number of Creditors," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 1-25, February.
    4. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Corporate Bonds; Corporate Investment; Institutional Investors; Insurance;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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