Publications
Publications
- July 2012
- Review of Financial Studies
The Real Consequences of Market Segmentation
By: Sergey Chernenko and Adi Sunderam
Abstract
We study the real effects of market segmentation due to credit ratings using a matched sample of firms just above and just below the investment-grade cutoff. These firms have similar observables, including average investment rates. However, flows into high-yield mutual funds have an economically significant effect on the issuance and investment of the speculative-grade firms relative to their matches, especially for firms likely to be financially constrained. The effect is associated with the discrete change in label from investment-grade to speculative-grade, not with changes in continuous measures of credit quality. We do not find similar effects at other rating boundaries.
Keywords
Segmentation; Credit; Investment; Investment Funds; Quality; Markets; Measurement and Metrics; Business Ventures
Citation
Chernenko, Sergey, and Adi Sunderam. "The Real Consequences of Market Segmentation." Review of Financial Studies 25, no. 7 (July 2012). (Winner of the RFS Young Researcher Prize 2012.)