Disruption and Credit Markets

Bo Becker,Victoria Ivashina

First published: 08 November 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, in line with our central hypothesis.