Erschienen in:Review of Financial Studies (Forthcoming)
Umfang:
1 Online-Ressource (90 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.2981447
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments January 19, 2020 erstellt
Beschreibung:
We examine empirically and theoretically the relation between firms' risk and their distance to consumers in a production network. We document two novel facts: firms that are further away from consumers have higher risk premia and higher exposures to aggregate productivity. We quantitatively explain these findings using a general equilibrium model featuring a multi-layer production process. The economic force is vertical creative destruction" --- positive productivity shocks to suppliers devalue customers' assets-in-place, which lowers the cyclicality of downstream firms' values. We show that vertical creative destruction varies with competition and firm characteristics, and generates sizable cross-sectional differences in risk premia