Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 22, 2022 erstellt
Beschreibung:
The recovery rate of capital determines lenders' credit supply, and in equilibrium, affects the demand and total credit amounts. Recent rising intangibles in the US may reduce recovery. I use CRSP/Compustat database to find that firms and industries with higher asset tangibility, a proxy for the recovery rate, issue more debts and have lower distance to default. To understand the aggregates, I build a canonical quantitative general equilibrium heterogeneous firm model and estimate the recovery rate by matching investment and debt covariance, average spread, and average default rate. The simulated method of moments (SMM) estimate of the recovery rate is 74%. The counterfactuals reveal that declines in the recovery rate reduce aggregate output, credit, and welfare by constraining capital accumulation. Tackling intangibles by a broader notion of capital, I estimate a recovery rate of 46% with the same model structure, implying that rising intangibles could cause nontrivial output and welfare losses due to financial frictions