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A discrete choice model for large heterogeneous panels with interactive fixed effects with an application to the determinants of corporate bond issuance

Author

Listed:
  • Lena Boneva (Körber)

    (Institute for Fiscal Studies)

  • Oliver Linton

    (Institute for Fiscal Studies and University of Cambridge)

Abstract

What is the effect of funding costs on the conditional probability of issuing a corporate bond? We study this question in a novel dataset covering 5610 issuances by US firms over the period from 1990 to 2014. Identifi cation of this effect is complicated because of unobserved, common shocks such as the global fi nancial crisis. To account for these shocks, we extend the common correlated effects estimator to settings where outcomes are discrete. Both the asymptotic properties and the small sample behavior of this estimator are documented. We fi nd that for non- financial fi rms, yields are negatively related to bond issuance but that e ffect is larger in the pre-crisis period.

Suggested Citation

  • Lena Boneva (Körber) & Oliver Linton, 2017. "A discrete choice model for large heterogeneous panels with interactive fixed effects with an application to the determinants of corporate bond issuance," CeMMAP working papers CWP02/17, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    • Handle: RePEc:ifs:cemmap:02/17
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    More about this item

    Keywords

    Heterogeneous panel data; discrete choice models; capital structure;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • 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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